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Chipotle expects to earn a free cash flow of $500 in 1 year; further, these cash flows are expected to grow at a rate of
Chipotle expects to earn a free cash flow of $500 in 1 year; further, these cash flows are expected to grow at a rate of 3% forever. The discount rate on the burrito assets is 15%. Chipotle also has debt outstanding with a face value of $1000 and a maturity of 1 year, with an annual interest rate of 10% and a yield-to-maturity of 7%. After the debt matures in 1 year, Chipotle will not issue more debt. What is the value of Chipotle if its tax rate is 40%?
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