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Your firm expects to make free cash flows of $65 next year, which will then grow...

Your firm expects to make free cash flows of $65 next year, which will then grow at a rate of 3.5% forever. Your firm has debt worth $600 and plans to keep it at that dollar amount forever. Your firm’s unlevered cost of capital is 10.0%, its cost of debt is 5.8%, and its tax rate is 15%. What is your firm’s current enterprise value (to 2 decimal places)?

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Answer #1

Enterprise Value=Free cash flow next year/(unlevered cost-growth rate)+Debt*Tax rate=65/(10%-3.5%)+600*15%
=1090

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