home / study / business / finance / finance questions and answers / suppose the expected free cash flow for year 1 is $250,000 but it is expected to grow unevenly ... Question: Suppose the expected free cash flow for Year 1 is $250,000 but it is expected to grow unevenly ov... Suppose the expected free cash flow for Year 1 is $250,000 but it is expected to grow unevenly over the next 3 years: FCF2 = $290,000 and FCF3 = $320,000, after which it will grow at a constant rate of 7%. The expected interest expense at Year 1 is $80,000, but it is expected to grow over the next couple of years before the capital structure becomes constant: Interest expense at Year 2 will be $95,000, at Year 3 it will be $120,000 and it will grow at 7% thereafter. Please use these numbers: Tax Rate: Firm U = 40%, Firm L = 14% Value of Firm: Firm U = 3,571,429, Firm L = 3,571,429 Value of Equity: Firm U = 3,571,429 , Firm L = 2,571,429 Levered Cost of Equity: = 16.33% WACC = 14%

What is the current total value? Please show how you came to that number.

The tax rate and unlevered cost of equity remain at 40% and 14% respectively.