Question

uppose Boyson Corporation's projected free cash flow for next year is FCF 1 = $150,000, and FCF is expected to grow at a constant rate of 6.5%. If the company's weighted average cost of capital is 11.5%, what is the value of its operations?

Answer 1

Firm's corporate value is $3,000,000

Step-by-step explanation:

Future cash flow = $150,000

Expected growth rate 6.5%

Weighted average cost of capital = 11.5%

Therefore, Firm's total corporate value = Future cash flow / Cost of capital - Growth rate

= $150,000 / 11.5% - 6.5%

= $3,000,000