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Flagstaff Enterprises expected to have free cash flow in the coming year of $8 million, and this free cash flow is expected to grow at
Flagstaff Enterprises expected to have free cash flow in the coming year of $8 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. Flagstaff has an equity cost of capital of 13%, a debt cost of capital of 7%, and it is in the 35% corporate tax bracket. Flagstaff maintains a 0.5 debt to equity ratio A) What is the enterprise value of Flagstaff if it was an all equity firm? (3 points) B) What is the enterprise value of Flagstaff as a levered firm? (3 points) C) What is the present value of the interest tax shield if the firm maintain the same debt- to-equity ratio? (3 points)
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