Question: You are trying to value Wagner Tools Inc. based on its free cash flow. Currently, free cash flows are estimated at $575,000. Free cash flows

You are trying to value Wagner Tools Inc. based on its free cash flow. Currently, free cash flows are estimated at $575,000. Free cash flows are expected to grow at 9% in year 1, then at 5% for three years (years 1-4). Then, growth is expected to be a constant 2% per year thereafter. The firm has a debt-to-equity ratio of .87. The cost of equity for Mountain is 13% and the weighted average of the YTM of bonds outstanding is 7.5%. Mountain has no preferred stock outstanding. The tax rate is 35%. What is the value of the firm using WACC as the appropriate discount rate?

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