Saito Solar Case
Explain what is going on in the case (short description a paragraph will suffice) Identify the main issues.
Using the discounted cash flow approach, why are projected free cash flows, rather than profits, used in estimating the value of the firm?
What is the role of WACC in valuation?
Based on Mr. Suzuki’s estimate of 1-3% growth rate of Saito Solar’s free cash flows over the next 20 years, ?how much would Saito Solar be valued at? The owners’ required rate of return was 10%.
How do you estimate firm value when free cash flows of the firm are uneven for the first few years but stay ?constant after?
Based on the free cash flow forecast provided in Appendix 3 of the case, and assume a range of 9-11% WACC ?and 1-3% terminal value growth rate, what is the range of values for Saito Solar?
Strategically, do you think Mr. Saito and his partners should sell the firm at this time? ? Why? Conclude.