Consider a firm with zero NWC right now (t=0). The firm has the following projected accounting...

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Consider a firm with zero NWC right now (t=0). The firm has the following projected accounting information for next year (t=1): The firm's EBIT is expected to be $10 million. Depreciation and Capital Expenditures are each expected to be $1 million. The firm expects zero net working capital (NWC). The firm expects its free cash flows after t=1 to stay the same as its t=1 free cash flows. The firm has a 0% tax rate, an equity beta of 1.3, and a debt beta of 0.1. It has a leverage ratio (D/V) of 50%. The market risk premium is 10%, and the risk-free rate is 2%. What is the enterprise value of the firm? Consider a firm with zero NWC right now (t=0). The firm has the following projected accounting information for next year (t=1): The firm's EBIT is expected to be $10 million. Depreciation and Capital Expenditures are each expected to be $1 million. The firm expects zero net working capital (NWC). The firm expects its free cash flows after t=1 to stay the same as its t=1 free cash flows. The firm has a 0% tax rate, an equity beta of 1.3, and a debt beta of 0.1. It has a leverage ratio (D/V) of 50%. The market risk premium is 10%, and the risk-free rate is 2%. What is the enterprise value of the firm?

Answer rating: 100% (QA)

Heres how to calculate the enterprise value EV of the firm 1 Calculate the firms free cash flow FCF ... View the full answer