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Likurg_2 [28]
3 years ago
15

Suppose Boyson Corporation's projected free cash flow for next year is FCF1 = $100,000, and FCF is expected to grow at a constan

t rate of 6.5%. If the company's weighted average cost of capital is 11.5%, what is the firm's total corporate value?
Business
1 answer:
Molodets [167]3 years ago
5 0

Answer:

Value of firm today = $2,000,000

Explanation:

Provided details are,

Future Cash Flow = $100,000

Expected growth rate = 6.5%

Weighted average cost of capital = 11.5%

Firm's total corporate value = \frac{Future\ Cash\ Flow}{Cost\ of\ capital - growth\ rate}

= \frac{100,000}{0.115 - 0.065}

= \frac{100,000}{0.05}

= $2,000,000

Thus, value of firm today with the details provided = $2,000,000

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