Question: Calculate MCI Communications Value / FCFF
MCI Communications had earnings before interest and taxes of $3,356 million in 1994 (Its net income after taxes was $855 million).
It had capital expenditures of $2,500 million in 1994 and depreciation of $1,100 million; Working capital increased by $250 million.
It expects free cash flows to the firm to grow 18% a year for the next five years and 3% a year after that.
The cost of capital is 11% for the next five years and 9% after that.
The company faces a tax rate of 40%.