The free cash flow to the firm is $300 million in perpetuity, the cost of equity equals 14%, and the WACC is 10%. If the market value of the debt is $1 billion, what is the value of the equity using the free cash flow valuation approach?
A) $1 billion
B) $2 billion
C) $3 billion
D) $4 billion
Correct Answer:
Verified
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