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Suppose Boyson Corporation’s projected free cash flow for next year is $100,000, 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% and the required return on equity is 14.5%, what is the firm’s total corporate value?

Respuesta :

Answer:

$2,000,000

Explanation:

The computation of the firm total corporate value is shown below:

The firm corporate value is

= Free cash flow for next year ÷ (weighted average cost of capital - growth rate)

= $100,000 ÷ (11.5% - 6.5%)

= $2,000,000

We simply applied the above formula to find out the firm corporate value

And ignored the required rate on equity i.e 14.5%

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