An unlevered firm has 10,000 shares outstanding. Its free cash flow is a risk-free flat perpetuity. The firm is considering buying back half of its share with £50,000 perpetual risk-free debt. The risk-free interest rate is 6%. Assume this operation has no price impact and there is no corporate tax. If the firm breaks even in this operation.

What is its free cash flow?

Answer rating: 100% (QA)

Since the free cash flow is a riskfree flat perpetuity we can use the formula for the present value of a perpetuity to find its value Free cash flow F ... View the full answer