Answer to Question #49877 in Economics of Enterprise for John
Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm’s value of operations, in millions?
At t = 1 FCF = -$10 million, FCF (t = 2) = $20 million. After Year 2 FCF is expected to grow at a constant rate of 4% forever. WACC = 14%. Firm’s value of operations will be: NPV = sum(FCF/(1 + wacc))^n = -10/1.14 + 20/1.14^2 + 20*1.04/(1.14^3*0.14) = 8.58 million.
AssignmentExperts are exactly what their name says. It was my first time using an assignment assistant and they simply were amazing, in the future if I ever need help I will be only using AssignmentExperts. Thank yall so much for excellent customer service and the great quality of work produced. Look forward to working with you in the future with any assignment assistant needs I have.