Capital Structure : key information
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Suppose K Corporation's projected free cash flow for next year is $100,000, and FCF is expected to grow at a constant rate of 6%. If the company's weighted average cost of capital is 11%, what is the value of its operations? Is it 2,000,000 or 2,100, 000?
Provide a brief overview of capital structure effects. Please be sure to identify the ways in which capital structure can affect the weighted average cost of capital and free cash flows.
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Solution Summary
Key information for capital structure are analyzed for K Corporation. A Brief overview of capital structure effects is determined.
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Value of Operations= Free cash flow of Next year /(WACC-Growth rate)
=100000/(11%-6%)
$2,000,000.00
Hence its $2000000
Provide a brief overview of capital structure effects. Please be sure to identify the ways in which capital structure can affect the weighted average cost of capital and free cash flows.
A firm's optimal ...
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