A firm with no debt and no preferred stock is expected to have free cash flow...

A firm with no debt and no preferred stock is expected to have free cash flow of $46 million each year indefinitely. If investors require a 9% return on their equity, what is the value of the firm's equity?

Expert Solution

Value of firm = 46/0.09

Value of firm = $511.11 million

As there is no debt or preferred stock,

Value of equity = $511.11

jeff jeffy answered 2 years ago

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A firm with no debt and no preferred stock is expected to have free cash flow...

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