A firm is expected to generate $10M in sales next year. The annual costs are expected to be 20% of sales. The tax rate is 30%. The after-tax cash flow is expected to remain constant forever. The firm has $18.46M of debt and its target debt ratio is 30%. The unlevered cost of capital is 10% and the cost of debt is 5%.


Find the value of the firm using the FTE method.

Answer rating: 100% (QA)

To use the Free Cash Flow to Equity FTE method to value the firm we need to calculate the unlevered ... View the full answer