Use the free 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 $5 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 19% of pretax cash flow each year. The tax rate is 35%. Depreciation was $350,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 8% per year, and the firm currently has debt of $7 million outstanding. Use the free cash flow approach to value the firm’s equity. (Round answer to nearest whole number. Enter your answer in dollars not in millions.)

Reference no: EM131932834

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