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EMC Corporation has never paid a dividend

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2. EMC Corporation has never paid a dividend. Its current free cash flow is $510,000 and
is expected to grow at a constant rate of 5%. The weighted average cost of capital is WA
CC = 9%. Calculate EMC's equity value if the net debt is $750,000.
Solution
Data
V = value
CF = cash flow = $510000
g = growth = 5%
WACC = weighted cost of capital = 9%
Formula used
V = [CF x (1+g)]/(WACC-g)
So
Value of operations = Vo = PV of expected future free cash flow
We get
V =$510000 (1.05)/ 0.09 -0.05 = 535500/ 0.04
= $13387500

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2.?EMC?Corporation?has?never?paid?a?dividend.?Its?current?free?cash?flow?is?$510,000?and?is?expected?to?grow?at?a?constant?rate?of?5%.?The?weighted?average?cost?of?capital?is?WACC?=?9%.?Calculate?EMC's?equity?value?if?the?net?debt?is?$750,000. Solution Data V = value CF = cash flow = $510000 g = ...
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