You are building a free cash flow to the firm model. You expect
sales to grow...
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You are building a free cash flow to the firm model. You expectsales to grow from $1 billion for the year that just ended to $2billion five years from now. Assume that the company will notbecome any more or less efficient in the future. Use the followinginformation to calculate the value of the equity on a per-sharebasis.
Assume that the company currently has $300 million of netPP&E.
The company currently has $100 million of net workingcapital.
The company has operating margins of 10 percent and has aneffective tax rate of
28 percent.
The company has a weighted average cost of capital of 9 percent.This is based on a
capital structure of two-thirds equity and one-third debt.
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In order to correctly formulate our worksheet we must do somepreliminary calculationsFirst we need to determine a growth rate for sales It is giventhat sales were at 1 Billion
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