Question

Justus Motor Co.has a WACC of 11.50%, and its value of operations is $25.00 million. Justus's free cash flow is expected to grow at a constant rate of 7.00%. What was the last free cash flow, FCF0 in millions?

Answer 1

WACC =11.50%

Growth (g) =7%

Value of operations =$25 million

Value of operation$=\frac{FCFO}{WACC-g}$

$25million$=\frac{FCF0}{11.50-7}$

Therefore ${FCFO}$ $=1.16$ million