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A company’s free cash flow was just FCF0 = $5.92million. The weighted average cost of...

A company’s free cash flow was just FCF0 = $5.92 million. The weighted average cost of capital is WACC = 13%, and the constant growth rate is g = 5%. What is the current value of operations?

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Expert Solution

Given FCFF 0 = $5.92 Million

WACC = 13%

Growth rate = 5%

Computation of FCFF in Year 1

FCFF in Year 1 = FCFF 0+ 5% ( FCFF 0)

=$ 5.92 Million+ 5% ( $ 5.92 Million)

= $ 5.92 Million + $ 0.296 Million

= $ 6.216 Million

Computation of Current value of operations

Current value of the operations = FCFF in Year 1 / (Cost of Capital - growth rate)

= $ 6.216/ ( 0.13-0.05)

= $ 6.216/0.08

= $ 77.7 Million

Hence the Current value of the operations is $ 77.7 Million or $ 777,00000

jeff jeffy answered 2 years ago
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