Computation Question 2: Mister Bodegas Industries (MBI) sales are expected to be $100 million in...
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Computation Question 2: Mister Bodegas Industries (MBI) sales are expected to be $100 million in one year. MBIs EBIT will be a constant 40% of sales. Corporate tax rates are 40%. MBI has a weighted average cost of capital equal to 15% and its free cash flows grow at a 5% rate.
MBI has $30 million in debt and $10 million in cash. MBI has 5 million shares outstanding.
(ii) Use the DCF valuation model to determine MBIs enterprise value. (Note that you only know year 1 FCF. Beyond year 1, FCF grows at a constant rate.)
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