Respuesta :
Answer:
The total corporate value of the firm is $3,000,000
Explanation:
The total corporate value of the firm is computed as:
Total corporate value = FCF1 / (average cost of capital - Growth rate)
Where
FCF1 is $150,000
Growth rate is 6.5%
average cost of capital is 11.5%
Putting the values :
= $150,000 / (11.5% - 6.5%)
= $150,000 / 5%
= $3,000,000
According to given equation, the total corporate value of the firm is $3,000,000.
What is term cost of capital about?
Cost of capital defined as the minimum rate of return that a company needs to generate in order to justify the cost of particular project.
Given Information:-
FCF1 =$150,000
Growth rate= 6.5%
Average cost of capital= 11.5%
Solution:-
The total corporate value of the firm is computed as:-
Total corporate value = FCF1 / (average cost of capital - Growth rate)
Total corporate value= $150,000 / (11.5% - 6.5%)
Total corporate value= $150,000 / 5%
Total corporate value= $3,000,000
Learn more about cost of capital, refer to the link:
https://brainly.com/question/16202400
