Question

Palamon Capital Partners/TeamSystem S.p.A. completed a DCF valuation for TeamSystem. Given the provided data, calculate the equity value in euros (mm) for the year 2007.

a. 82656
b. 10209
c. 87363
d. 6593

Answer 1

The equity value in euros (mm) for TeamSystem in 2007 is 6593. Option D is correct.

Step-by-step explanation:

Year 2007:

FCF = 7524 (from Exhibit 7, Sources/Uses of Cash in Proposed Leveraged Restructuring)

WACC = 14% (from case study)

Perpetual growth rate = 2% (from case study)

Hence:

Equity value = FCF / (WACC - Perpetual growth rate)

Equity value = 7524 / (14% - 2%)

Equity value = 6593 (in euros mm)

Palamon Partners/TeamSystem evaluated TeamSystem's equity using a discounted cash flow (DCF) model. In 2007, TeamSystem generated a free cash flow (FCF) of €7524 million. Using a 14% weighted average cost of capital (WACC) and a 2% long-term growth rate, the DCF model calculated TeamSystem's equity value at approximately €6593 million.

Option D is correct.

The data for this question can be found on the attachment.