Multiple Choice
Consider the free cash flow approach to stock valuation.Utica Manufacturing Company is expected to have before-tax cash flow from operations of $500,000 in the coming year.The firm's corporate tax rate is 30%.It is expected that $200,000 of operating cash flow will be invested in new fixed assets.Depreciation for the year will be $100,000.After the coming year,cash flows are expected to grow at 6% per year.The appropriate market capitalization rate for unleveraged cash flow is 15% per year.The firm has no outstanding debt.The total value of the equity of Utica Manufacturing Company should be
A) $1,000,000
B) $2,000,000
C) $3,000,000
D) $4,000,000
E) none of these
Correct Answer:
Verified
Correct Answer:
Verified
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