Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's free cash flows are declining at the constant rate of 6% per year. If its current free cash flow (FCF0) is $4 million and its weighted average cost of capital (WACC) is 11%, what is the estimated value of Brushy Mountain's value of operations? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to two decimal places.

SOLUTION- Compute the estimated value of operations: Current price=D1/(Required return-Growth…

Answered: Brushy Mountain Mining Company's coal…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's free cash flows are declining at the constant rate of 6% per year. If its current free cash flow (FCF₀) is $4 million and its weighted average cost of capital (WACC) is 11%, what is the estimated value of Brushy Mountain's value of operations?

Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to two decimal places.

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