Cash flow approach to value the firm equity

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The MoMi Corporation's cash flow from operations before interest and taxes was $2.4 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 18% of pretax cash flow each year. The tax rate is 35%. Depreciation was $220,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate discount rate for the unleveraged cash flow is 9% per year, and the firm currently has debt of $4.2 million outstanding. Use the free cash flow approach to value the firm's equity. (Do not round intermediate calculations. Omit the "tiny_mce_markerquot; sign in your response.)

Value of the equity

Reference no: EM132932869

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