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Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non- operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm's total corporate value (in millions)? Do not round intermediate calculations. Year Free Cash flow 1 -$50 2 $175

Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non- operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm's total corporate value (in millions)? Do not round intermediate calculations. Year Free Cash flow 1 -$50 2 $175

Essentials Of Investments
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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Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non- operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm's total corporate value (in millions)? Do not round intermediate calculations. Year Free Cash flow $3,151 $2,867 $2,944 $3,099 1 -$50 Show Transcribed Text 2 $175 e Which of the following statements is CORRECT? When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation. O All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, Tg. O All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
Transcribed Image Text:Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non- operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm's total corporate value (in millions)? Do not round intermediate calculations. Year Free Cash flow $3,151 $2,867 $2,944 $3,099 1 -$50 Show Transcribed Text 2 $175 e Which of the following statements is CORRECT? When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation. O All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, Tg. O All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
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