$10.$

The corporate valuation model, the price$-$to$-$earnings $($P$/$E$)$ multiple approach, and the economic value added $($EVA$)$ approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend$-$based valuation that you$$ve done in previous problems, but it focuses on a firm$$s free cash flows $($FCFs$)$ instead of its dividends. Some firms don$$t pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model.

Tropetech Inc. has an expected net operating profit after taxes, EBIT$(1$ T$),$ of $$2,400$ million in the coming year. In addition, the firm is expected to have net capital expenditures of $$360$ million, and net operating working capital $($NOWC$)$ is expected to increase by $$45$ million. How much free cash flow $($FCF$)$ is Tropetech Inc. expected to generate over the next year?

$$2,085$ million

$$2,715$ million

$$43,481$ million

$$1,995$ million

Tropetech Inc.$$s FCFs are expected to grow at a constant rate of $3\mathrm{.}90\%$ per year in the future. The market value of Tropetech Inc.$$s outstanding debt is $$11,510$ million, and its preferred stocks$$ value is $$6,394$ million. Tropetech Inc. has $675$ million shares of common stock outstanding, and its weighted average cost of capital $($WAC$)$ equals $11\mathrm{.}70\%.$

Term Value $($Millions$)$

Total firm value $-------$

Intrinsic value of common equity $----$

Intrinsic value per share $-------$

Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firm has no nonoperating assets.