Question

18 5 points You are trying to estimate the value of the XYZ Inc. company, as of the end of 2018. The after-tax cashflow from assets (FCFF) for the year ending 2018 is $145 million. The estimated WACC is 10%. What comes closest to the current value of the firm XYZ if the cashflow from assets are expected to grow at a constant rate of 2% in the future? O OOO 1849 million 1479 million 2113 million 1813 million 1450 million 19 5 points You are trying to estimate the value of the XYZ Inc. company, as of the end of 2018. The after-tax cashflow from assets (FCFF) for the year ending 2018 is $145 million. The estimated WACC is 10%. What comes closest to the current value of the firm XYZ if the cashflow from assets are not expected to grow in the future? 0 O 1305 million 1850 million 1611 million 1450 million 1700 million O

Answer 1

Part 18:
Answer: $1849 million

Given that the free cash flow to firm (FCFF) is $145 million
Weighted average cost of capital (WACC) is 10%
Growth rate is 2%
Value of the firm =(Cash flow)*(1+ Growth rate)/(WACC-Growth rate)
On substituting the values, we get;
Value of the firm =(145)*(1+2%)/(10%-2%)
=147.9/0.08
=1848.75 or 1849 (Rounded to the nearest whole number)

Part 19:
Answer: $1450 million
Given that the free cash flow to firm (FCFF) is $145 million
Weighted average cost of capital (WACC) is 10%
Growth rate is 0%
Value of the firm =(Cash flow)*(1+ Growth rate)/(WACC-Growth rate)
On substituting the values, we get;
Value of the firm =(145)*(1+0%)/(10%-0%)
=1450