This would be a simple time value of money calculation. Just plug these values into adjacent cells in Excel and use the NPV() function to calculate the value of one business cycle.

You could also use a discounted cash flow formula:


Present Value = Future Value / (1 + Discount Rate) ^ Number of periods

You would have to perform this formula on each of your cash flows and sum them to get a valuation (this is essentially what Excel does in the NPV function). Substitute the "number of periods" for the corresponding year for each of the cash flows.

I get $13,813,947.13 for the present value of one business cycle.

You can now use a perpetuity calculation to get the value of the whole company for future cash flows:

Cash Flow / Discount rate

The trick here is that you have to adjust the discount rate for a 4-year period.

(1+r)^n - 1 = (1+ 10%)^4 -1 = 46.41%

Then you have: $13,813,947.13 / 46.41% = $29,765,022.91.

That looks about right for the valuation.

This formula is way too simplified. The risk of the company losing its value has to be taken into consideration as well. A company that has no real liability is definitely worth all other factors being the same than a company that is loaded with liabilities.

CC, remember that in an elementary Corp Fin question such as posed by the original poster, the riskiness of the CFs is already accounted for in the discount rate. Also, as per M&M, the value of a defined CF stream is independent of how the cash flow stream is divvied up among the various claimholders (equity, debt).

If on the other hand these cash flows are defined from the perspective of one party (the shareholders, say) then the expected CFs to the debtholders are already carved out, and again the leverage question is irrelevant.

Cheers, all!