he MoMi Corporation's cash flow from operations before interest and taxes was $4.8 million in the year just ended, and it expects hat this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 20% of pretax cash f ach year. The tax rate is 21%. Depreciation was $340,000 in the year just ended and is expected to grow at the same rate as the perating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 13% per year, and the firm currently as debt of $6.9 million outstanding. Use the free cash flow approach to value the firm's equity. (Round answer to nearest whole umber. Enter your answer in dollars not in millions.) > Answer is complete but not entirely correct. Value of the equity $ (2,029,650) X
he MoMi Corporation's cash flow from operations before interest and taxes was $4.8 million in the year just ended, and it expects hat this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 20% of pretax cash f ach year. The tax rate is 21%. Depreciation was $340,000 in the year just ended and is expected to grow at the same rate as the perating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 13% per year, and the firm currently as debt of $6.9 million outstanding. Use the free cash flow approach to value the firm's equity. (Round answer to nearest whole umber. Enter your answer in dollars not in millions.) > Answer is complete but not entirely correct. Value of the equity $ (2,029,650) X
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The MoMi Corporation's cash flow from operations before interest and taxes was $4.8 million in the year just ended, and it expects
that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 20% of pretax cash flow
each year. The tax rate is 21%. Depreciation was $340,000 in the year just ended and is expected to grow at the same rate as the
operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 13% per year, and the firm currently
has debt of $6.9 million outstanding. Use the free cash flow approach to value the firm's equity. (Round answer to nearest whole
number. Enter your answer in dollars not in millions.)
Answer is complete but not entirely correct.
$ (2,029,650) X
Value of the equity
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