13.2 - a company after spending the capital needed to...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
13-2 EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC = 12%. Calculate EMC’s value of operation. Value of operations = Vo = PV of expected future free cash flow FCF(1+g)/WACC-g = $400,000(1.05)/.12-.05 =$6,000,000 Free Cash Flow (FCF) is a measure of financial performance. I represent the cash that remains in
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a company after spending the capital needed to maintain or expand its asset base. It is very important because it provides the company with the ability to act in favor of enhancing shareholder value. It is the cash the company will use to develop new products, reduce debt, make acquisitions, pay dividends etc. ( http://www.investopedia.com/terms/f/freecashflow.asp#ixzz1oJhtQFLY )....
View Full Document

This note was uploaded on 04/06/2012 for the course FINANCE 410 taught by Professor N/a during the Spring '09 term at AIU Online.

Ask a homework question - tutors are online