Widget Corp. is expected to generate a free cash flow (FCF) of $1,235.00 million this year (FCF, = $1,235.00 million), and the FCF is expected to growat a rate of 20.20% over the following two years (FCF, and FCF). After the third year, however, the FCF is expected to grow at a constant rate of2.46% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Widget Corp.'s weighted average cost of capital (WACC)is 7.38%, what is the current total firm value of Widget Corp.? (Note: Round all intermediate calculations to two decimal places.)O. $41,037.63 millionO $33,890.56 millionO $3,878.69 millionO $40,668.67 million

To calculate the current total firm value of Widget Corp., we need to use the discounted cash flow…

Answered: Widget Corp. is expected to generate a…

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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Similar questions

A retail coffee company is planning to open new coffee 95 outlets that are expected to generate $13.3 million in free cash flows per year, with a growth rate of 3.3% in perpetuity. If the coffee company's WACC is 10.6%, what is the NPV of this expansion?
Praxis Corp. is expected to generate a free cash flow (FCF) of $5,670.00 million this year (FCF, = $5,670.00 million), and the FCF is expected to grow at a rate of 22.60% over the following two years (FCF, and FCF). After the third year, however, the FCF is expected to grow at a constant rate of 3.18% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Praxis Corp.'s weighted average cost of capital (WACC) is 9.54%, what is the current total firm value of Praxis Corp.? (Note: Round all intermediate calculations to two decimal places.) $155,715.35 million O $17,453.56 million $122,645.86 million $147,175.03 million Praxis Corp.'s debt has a market value of $91,984 million, and Praxis Corp. has no preferred stock. If Praxis Corp. has 375 million shares of common stock outstanding, what is Praxis Corp.'s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.) $81.76 $80.76 $89.94 $245.29
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A mail order business will generate cash flows of $9,000 at the end of each of the next 3 years, $19,000 at the end of year 4, $25,000 at the end of year 5 and $45,000 at the end of year 6. Given that other investments of equal risk earn 8% per annum, calculate the present value and future value of this investment

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