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The MoMi Corporation’s cash flow from operations before interestand taxes was $2.5 million in the year just ended, and it expectsthat this will grow by 5% per year forever. To make this happen,the firm will have to invest an amount equal to 19% of pretax cashflow each year. The tax rate is 21%. Depreciation was $310,000 inthe year just ended and is expected to grow at the same rate as theoperating cash flow. The appropriate market capitalization rate forthe unleveraged cash flow is 12% per year, and the firm currentlyhas debt of $5 million outstanding. Use the free cash flow approachto calculate the value of the firm and the firm’s equity.(Enter your answer in dollars not inmillions.)
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