etty Corporation forecasts a negative free cash flow for the

etty Corporation forecasts a negative free cash flow for the coming year, with FCF_1 = -$10 million, but it expects positive numbers thereafter, with FCF_2 = $28 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm\'s total corporate value, in millions? Your answer should be between 42.68 and 352.15, rounded to 2 decimal places, with no special characters.

Solution

firm\'s total corporate value = -10/1.14 + 28/(0.14 - 0.04)*1.14

firm\'s corporate value = 236.84 million