Today is January 1st, 2019 and Bijou Yang operates a pet supplies store specialized in dry cat food. Her initial investment was $1,000 from her own saving.  Each year Bijou has been earning a constant NOPAT of $108. She has never grown the company and taken out all free cash flow in prior years in the form of dividends. However, Bijou is considering whether she should grow her business at a rate of 5% per year. Any investment will be done at the end of the year and all cash flows occur at the end of the year. Bijou assumes the future RONIC on any investment will be the same as her current ROIC. If the WACC for the business is 12%.

How much, in dollar terms, will the firm value change (relative to the current value) due to the growth decision (enter a negative number for value decreasing and a positive number for value increasing)?

Answer rating: 100% (QA)

ANSWER IS To calculate the impact of the growth decision on the firm value we need to determine the ... View the full answer