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Nataly_w [17]
2 years ago
15

Costco Wholesale Corp. has FCFE of $2.00 billion in the most recent year. The cash flows are expected to grow at the annual rate

of 3%. Costco has the weighted average cost of capital of 9% and the cost of equity of 12%. The book value of debt is $20.72 billion and the market value of debt is $24.44. Given these assumptions, which of the following is closest to the current firm value of Costco?
a. $47.3 billion
b. $43.6 billion
c. $58.8 billion
d. $46.7 billion
Business
1 answer:
Svetlanka [38]2 years ago
7 0

Answer:

a. $47.3 billion

Explanation:

The computation of the current value of the firm is as follows;

Value of Equity = FCFE × (1+ g ) ÷ (ke - g)

= $2 billion × (1 + 0.03) ÷ (0.12 - 0.03)

= $22.89 billion

Now  

Current Value of Firm = Market Value of equity + market Value of Debt

= $22.89 billion + $24.44 billion

= $47.3 billion

Hence, the current value of the firm is $47.3 billion

hence, the correct option is A.

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In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information ab
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Conditions that can create conflicts can be classified into three categories. Which of the following is one of these three categ
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Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $12.5 million. The fair value of Midwest's asset
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Answer:

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6 0
1 year ago
Juarez Builders incurred $285,000 of labor costs for construction jobs completed during the month of August, of which $212,000 w
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Dr Factory overhead   $73,000

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1 year ago
Read 2 more answers
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