Final answer:
The total firm value of Tropetech Inc. can be calculated using the Gordon Growth Model by considering the growth rate, WACC, and the market values of debt and preferred stock. Without the actual free cash flow (FCF) or share price, we cannot compute the exact value.
Step-by-step explanation:
To calculate the total firm value of Tropetech Inc., we need to use the Gordon Growth Model because the firm's free cash flows (FCFs) are expected to grow at a constant rate. The Gordon Growth Model is expressed as:
V = D / (k - g)
where V is the firm's value, D is the expected dividend (or FCF), k is the firm's weighted average cost of capital (WACC), and g is the growth rate of FCFs.
However, we are not provided with the FCFs. Instead, we have the WACC, the market value of the firm's debt and preferred stock, the number of common shares outstanding, and the growth rate of FCFs. To proceed, we need to either know the FCF or calculate the value of equity using the WACC.
To find the equity value, we would subtract the market value of the debt and preferred stock from the total firm value:
Equity Value = Total Firm Value - Debt - Preferred Stock
To calculate the market capitalization of the common stock, we would use the following formula:
Market Capitalization = Share Price x Number of Shares Out
If we knew the current share price, we could then find the total firm value by adding the market values of the debt, preferred stock, and equity.
Assuming the Share Price is P, we can rewrite the model as follows for the equity portion of the firm:
Equity Value = (P x 750 million) = P x 750
Since we don't have actual numbers for FCF or P, this is as far as we can go with the information provided. To finalize the calculation, we would need either the FCF or the current share price.