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ReMATE Incorporate expects free cash flow earnings of $8 million next year. Since the firm is...

ReMATE Incorporate expects free cash flow earnings of $8 million next year. Since the firm is mature, it only expects growth of 2% per year. The firm's copy of capital is estimated at 10%. If the firm has $3 million in excess cash and $10 million in debt, what is the enterprise value of the firm? Assume the firm has 10 million shares outstanding.

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Answer #1

Answer:

Calculation of enterprise value of the firm:

= Present value of cash inflows + Cash + Debt

Present value of cash inflows = $8 milliom / (10% - 2%)

= $8 million / 8%

= $100 million

Enterprise value of the firm: ($100 + $3 + 10) million

= $113 million Answer

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