7. Company A has a Free Cash Flow (FCF) of $62 million. Their growth rate is...

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7. Company A has a Free Cash Flow (FCF) of $62 million. Their growth rate is 7% and cost of equity is 10%. What is the value 8. Company Z provides financial services for its customers. They have debt of $25 million of which they pay $1.8 million per

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Answer 1

Answer #1

Solution to QUESTION-7

The Value of the Company

Here, we’ve the Free Cash Flow (FCF) = $62 Million

Expected growth rate (g) = 7.00%

Cost of Equity (Ke) = 10.00%

Therefore, the Value of the Company = Free Cash flow / (Cost of equity – Growth rate)

= FCF / (Ke – g)

= $62 Million / (0.10 – 0.07)

= $62 Million / 0.03

= $2,066.67 MIllion

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Answer 2

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