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Q6 . You are trying to understand how much company ABC is worth by using a discounted cash flow (DCF) approach. The free cash flow
Q6. You are trying to understand how much company ABC is worth by using a discounted cash flow (DCF) approach. The free cash flow next year (t1) is estimated to be $100 million, and this amount will grow annually by 5% until year 5 (t5). After year 5, the free cash flow growth rate levels down to 3% and the company is expected to maintain this growth rate forever. The company's cost of debt is 3%, and its cost of equity is 9%. The company's capital structure consists of 50% debt and 50% equity. Tax rate is 21%. Based on the information provided, please estimate the current valuation of the firm. |
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