1) How can organizations create a reliable estimate of future sales expenses for an accurate assessment...

1) How can organizations create a reliable estimate of future sales expenses for an accurate assessment of enterprise value based on future cash flows?

Expert Solution

Answer Organizations create a reliable estimate of future sales expenses for an accurate assessment of enterprise value based on future cash flows by determining the Present Values of all the future outflows and future inflows using the Cost of Capital as discount rate. The Present Values of future cash flows are added to calculate the NPV. Then the initial outlay done in the present year is subtracted from the NPV. The current long-term debt is subtracted from this NPV, and cash is added. The final value gives the Enterprise Value.

Future cashflows are forecasted by incremental growth with the average growth rate of last 3 to 5 years also incorporating the inflation.

jeff jeffy answered 2 years ago

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