Business Finance Homework Help

This year has been a hot market for IPOs, and Airbnbwas a recent high profile one. Valuing a company is basically a big capital budgeting exercise. Instead of forecasting the cash flows from a single project, you forecast the cash flows for the whole company. Instead of calculating the NPV of a new product, you calculate the NPV of the cash flows of the whole company. One complicating factor is that while a product will come to an end, in principle a company will not (we hope). So, we have to make an assumption at some point about how the cash flows of the company grow in the long–run (more on this below). The typical approach to valuing a company is to start by specifically forecasting the cash flows for the next 5 to 10 years and then make a simplifying assumption beyond that.