Value of the firm
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From the following financial data, calculate the value of the firm:
After-tax operating cash flow (YR 1) $50,000,000
After-tax operating cash flow (YR 2) $53,000,000
After-tax operating cash flow (YR 3) $57,000,000
Terminal cash flow $762,375,000
Cost of debt (after-tax) 4.5%
Tax rate 40%
Cost of equity 11.5%
Capital structure 50/50 (debt/equity)
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Solution Summary
The solution explains how to calculate the value of the firm.
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The value of the firm is the present value of after tax operating cash flows, discounted at WACC
WACC = Proportion of debt X ...
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