Question

Tropetech Inc.’s FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Tropetech Inc.’s outstanding debt is $4,894 million, and its preferred stocks’ value is $2,719 million. Tropetech Inc. has 225 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%.Find the total firm value ?

Answer 1

The total firm value is $10,877 million

Step-by-step explanation:

Value of Firm = Expected FCF/(WACC - Growth Rate)

= $1,005 million/(0.1386 - 0.0462)

= $1,005 million / 0.0924

= $10,877 million

Therefore, The total firm value is $10,877 million