A company expects capital expenditures and depreciation to continue to offset each other and for both net income and increase in working capital to grow at 4% per year. The firm cost of capital is 12%. If the firm were able to reduce its annual increase in working capital by 20% by managing its working capital more efficiently. What would be the effect on firm's value? The firm Free Cash Flow and Working Capital for the year is 19M and 1M respectively.

Answer rating: 100% (QA)

To calculate the effect on the firms value we need to first calculate the firms Free Cash Flow to th... View the full answer