Value of Operations of Constant Growth Firm EMC Corporation has never paid a div
ID: 2613496 • Letter: V
Question
Value of Operations of Constant Growth Firm
EMC Corporation has never paid a dividend. Its current free cash flow of $440,000 is expected to grow at a constant rate of 4.5%. The weighted average cost of capital is WACC = 11.25%. Calculate EMC's estimated value of operations. Round your answer to the nearest dollar.
$
Value of Operations of Constant Growth Firm
EMC Corporation has never paid a dividend. Its current free cash flow of $440,000 is expected to grow at a constant rate of 4.5%. The weighted average cost of capital is WACC = 11.25%. Calculate EMC's estimated value of operations. Round your answer to the nearest dollar.
$
Explanation / Answer
Value of operations:
= Current free cash flows×(1+growth rate)÷(WACC- growth rate)
= $440,000×(1+4.5%)÷(11.25%- 4.5%)
= $6,811,851.85
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