FIN 534 RANK Imagine Your Future / FIN 534 RANK Imagine Your Future / - Page 164

Question 23 Suppose Yon Sun Corporation’s free cash flow during the just- ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm’s value of operations, in millions? Answer Question 24 Based on the corporate valuation model, Bernile Inc.’s value of operations is $750 million. Its balance sheet shows $50 million of short- term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long- term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm’s value of equity, in millions? Answer Question 25