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Tropetech Inc. has an expected net operating profit after taxes, EBIT(1 - T), of $2,400 million in the coming year. In additi

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Answer #1

Question 1:

Free cash flow = EBIT * (1 - Taxes) + Depreciation - Net capex - NOWC

Free cash flow = $2,400mil + 0 - $360 mil - $45 mil

Free Cash flow (FCF) = $1,995 million

Question 2:

Value of firm is present value of FCF expected in future.

FCF Value = r-9

Value =- 1995 0.1170 – 0.039

Value of firm = $25,576.92mil

Value of common equity = Value of firm - Value of debt - Value of preferred stock

Value of common equity = $25,576.92 - $11,510 - $6,394 = $7,672.92mil

Value per share = Value of Equity/Number of shares = $7,672.92mil/675mil = $11.37

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