Question: One of Vasudevan s divisions has above average risk and so
One of Vasudevan's divisions has above average risk and so a divisional weighted average cost of capital of 20%. This division has current sales of $600,000, operating income of $250,000, total net operating capital of $300,000, and a marginal tax rate of 35%. What is the Market Value Added (MVA) for this division if the constant growth FCF model applies and the division expects a constant growth in sales and FCFs of 6%?
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