Celmax Corporation expects free cash flows this year of $7.6 million and a future growth rate of 4% per year. The firm c

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answerhappygod
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Celmax Corporation expects free cash flows this year of $7.6 million and a future growth rate of 4% per year. The firm c

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Celmax Corporation expects free cash flows this year of $7.6
million and a future growth rate of 4% per year. The firm currently
has $30 million in debt outstanding. This leverage will remain
fixed during the year, but at the end of each year Celmax will
increase or decrease its debt to maintain a constant debtequity
ratio. Celmax pays 5% interest on its debt, pays a corporate tax
rate of 25%, and has an unlevered cost of capital of 12%. Estimate
Celmax’s value with this leverage policy.
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