Reliable Corp. has expected FCFs of $40 million per year, which are expected to continue forever. The first cash flow wi

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answerhappygod
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Reliable Corp. has expected FCFs of $40 million per year, which are expected to continue forever. The first cash flow wi

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Reliable Corp. has expected FCFs of $40 million per year, which are expected to continue
forever. The first cash flow will occur one year from today. The firm has committed to a maintain a
constant debt-equity ratio for its capital structure. The firm’s target D/E ratio is 0.6. The firm’s asset
cost of capital (ra) is 12%, and its cost of debt is 5%. The corporate tax rate is 50%. What is the PV
of the firm’s FCFs?
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