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Corporation blue is financed by both debt and equity. Total value of debt is $800,000 and total value of equity is $900,000. The cost for
Corporation blue is financed by both debt and equity. Total value of debt is $800,000 and total value of equity is $900,000. The cost for debt (yield to maturity) is 12% and the cost of equity is 16%. Corporate tax rate is 35%. The company plows back 40% of its earnings and has a return-on-equity (ROE) ratio of 15%. The company is expected to generate the following free-cash-flows provided in the table below. Year FCFs 1 25,000 2 35,000 3 4 46,000 18,000 5 36,000 Use the information above and respond to the following questions. a. Calculate the weighted average cost of capital b. Calculate the growth rate C Calculate the horizon value d. Calculate the value of the firm
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