# 8: DDM

8.00% rate (re)

$ 5.00 Dividend 1
$110.00 PPS 1

$106.48 PPS 0
#10: Constant Growth

5.00% growth
$ 10.00 Dividend 1
8.00% rate

$333.33 PPS 0
 Pharmecology
D0 $ 1.35 D1 $ 1.39
g 2.75%
re 9.50%

a. What is the PPS using nominal rates?

PPS $ 20.55

b. What is the PPS using real rates?

Real Rate 6.57%
PPS $ 20.55
 Oral Cal

D0 $1.85 D1 $1.96
g 6.00%
re 18.00%

Price $16.34
 Divided Health Group

Method 1
rate 11%
0 1 2 3 4 5
10% 10% 5% 5%
$3.00 $3.30 $3.63 $3.81 $4.00
$66.70
$3.00 $3.30 $3.63 $70.51
Price $54.48
 Bullseye Corp: Growth Terminal Value
Tax Rate 21.00% NWC $ 100,000
WACC 10.90% CAPEX $ 350,000

growth 10.00% 10.00% 5.00%

0 1 2 3 4
EBIT $ 500,000
Tax $ 105,000
NOPAT $ 395,000
Depreciation $ 250,000
OCF $ 645,000

Change in NWC $ (100,000)

CAPEX $ (350,000)

FCF $195,000.00 $ 214,500.00 $ 235,950.00 $ 247,747.50

$4,409,065.68
$195,000.00 $ 214,500.00 $ 235,950.00 $ 4,656,813.18

Enterprise Value $3,601,899.32

Add Cash $250,000.00
MVF $3,851,899.32
Less MVD $3,000,000.00
MVE $851,899.32
divide by #so $100,000.00
PPS $8.518993
nal Value
EBIT $ 500,000
Deprec $ 250,000

5.00% 5.00% 5.00%

5 6 7

$ 260,134.88 $ 273,141.62 $ 286,798.70

Terminal Value
 Bullseye Corp: Growth Terminal Value
Tax Rate 21.00% NWC $ 100,000
WACC 10.90% CAPEX $ 350,000

growth 10.00% 10.00% 5.00%

0 1 2 3 4
EBIT $ 500,000
Tax $ 105,000
NOPAT $ 395,000
Depreciation $ 250,000
OCF $ 645,000
EBITDA $ 750,000 $ 825,000 $ 907,500 $ 952,875
Change in NWC $ (100,000)

CAPEX $ (350,000)

FCF $195,000.00 $ 214,500.00 $ 235,950.00 $ 247,747.50

$5,002,593.75
$195,000.00 $ 214,500.00 $ 235,950.00 $ 5,250,341.25

Enterprise Value $3,994,286.75

Add Cash $250,000.00
MVF $4,244,286.75
Less MVD $3,000,000.00
MVE $1,244,286.75
divide by #so $100,000.00
PPS $12.442867
nal Value
EBIT $ 500,000 EBITA Multiple 5
Deprec $ 250,000

5.00% 5.00% 5.00%

5 6 7

$ 1,000,519 $ 1,050,545 $ 1,103,072

$ 260,134.88 $ 273,141.62 $ 286,798.70

Terminal Value
 1 2
-120,000,000 -80,000,000

NPV
 Bullseye Corp: Growth Terminal Value
Tax Rate 21.00% NWC $ 100,000
WACC 10.90% CAPEX $ 350,000

growth 10.00% 10.00% 5.00%

0 1 2 3 4
EBIT $ 500,000
Tax $ 105,000
NOPAT $ 395,000
Depreciation $ 250,000
OCF $ 645,000
EBITDA $ 750,000 $ 825,000 $ 907,500 $ 952,875
Change in NWC $ (100,000)

CAPEX $ (350,000)

FCF $195,000.00 $ 214,500.00 $ 235,950.00 $ 247,747.50

$4,409,065.19
$195,000.00 $ 214,500.00 $ 235,950.00 $ 4,656,812.69

Enterprise Value $3,601,899.00

Add Cash $250,000.00
MVF $3,851,899.00
Less MVD $3,000,000.00
MVE $851,899.00
divide by #so $100,000.00
PPS $8.518990
nal Value
EBIT $ 500,000 EBITA Multiple 4.4068
Deprec $ 250,000

5.00% 5.00% 5.00%

5 6 7

$ 1,000,519 $ 1,050,545 $ 1,103,072

$ 260,134.88 $ 273,141.62 $ 286,798.70

Terminal Value