The MoMi Corporation's cash flow from operations before interest and taxes was $4 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 16% of pretax cash flow each year. The tax rate is 21%. Depreciation was $300,000 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 $6.5 million outstanding. Use the free cash flow approach to value the firm's equity. Note: Round answer to nearest whole number. Enter your answer in dollars not in millions. Value of the equity
The MoMi Corporation's cash flow from operations before interest and taxes was $4 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 16% of pretax cash flow each year. The tax rate is 21%. Depreciation was $300,000 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 $6.5 million outstanding. Use the free cash flow approach to value the firm's equity. Note: Round answer to nearest whole number. Enter your answer in dollars not in millions. Value of the equity
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
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Transcribed Image Text:The MoMi Corporation's cash flow from operations before interest and taxes was $4 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 16% of pretax cash flow each
year. The tax rate is 21%. Depreciation was $300,000 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
$6.5 million outstanding. Use the free cash flow approach to value the firm's equity.
Note: Round answer to nearest whole number. Enter your answer in dollars not in millions.
Value of the equity
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