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Mooradian Corporation’s free cash flow during the just-ended year (t = 0) was $250 million, and its FCF is expected to grow at a constant rate of 5.0% in the future. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 12.5%, what is the firm’s total corporate value, in millions?

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Answer:

the firm’s total corporate value is 3.500.000.000

Explanation:

Consider the following formula to calculate the corporate value of the firm

Firm Total Corporate Value =Free cash flow (T1) / Ke - G

= 250.000.000 ( 1+0.05)/12.5%-5%

= 3.500.000.000

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