Assume a venture has a perpetuity enterprise value cash flow of $800,000. Cash flows are expected to continue to grow at 8 percent annually and the venture’s WACC is 15 percent.
A. Calculate the venture’s enterprise value.
B. If the venture has $2 million in interest-bearing debt obligations, what would be the venture’s equity value?
C. Show how your answers to Parts A and B would change if the perpetuity cash flow growth rate was only 6 percent and the WACC was 16 percent.