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The MoMi Corporation’s cash flow from operations before interest and taxes was $3 million in the...

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Finance

The MoMi Corporation’s cash flow from operations before interestand taxes was $3 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 15% of pretax cashflow each year. The tax rate is 35%. Depreciation was $250,000 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 8% per year, and the firm currentlyhas debt of $4.5 million outstanding. Use the free cash flowapproach to value the firm’s equity. (Round answer tonearest whole number. Enter your answer in dollars not inmillions.)

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3.6 Ratings (685 Votes)
Value of Firms Equity using free cash flow approach Particulars Amount Cash flow from operations before interest and taxes 3000000 x 105 3150000 Less    See Answer
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