Question

You are trying to calculate the enterprise value of DCB Corp using a free cash flow...

You are trying to calculate the enterprise value of DCB Corp using a free cash flow model. To that end you have put together some forecast for year 1 in the table below. Assume that free cash flows will grow at 1.5% in perpetuity and that the weighted average cost of capital of the firm (WACC) is 8%. Using this information, calculate the enterprise value of the firm. Express your answer in $-millions and round to two decimals (do not include the $-sign in your answer).

Forecasts for Year 1 (in $ millions)
Sales 142
Cost of sales 51
Selling, general and administrative expenses 6
Depreciation 25
Increase in Net Working Capital 5
Capital expenditures 36
Marginal corporate tax rate 20%

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