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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
The following are the projected cash flows to equity and to the firm over the next five years:
|
Year |
CF to Equity |
Int (1-t) |
CF to Firm |
|
1 |
$250.00 |
$90.00 |
$340.00 |
|
2 |
$262.50 |
$94.50 |
$357.00 |
|
3 |
$275.63 |
$99.23 |
$374.85 |
|
4 |
$289.41 |
$104.19 |
$393.59 |
|
5 |
$303.88 |
$109.40 |
$413.27 |
|
Terminal Value |
$3,946.50 |
 |
$6,000.00 |
(The terminal value is the value of the equity or firm at the end of year 5.) The firm has a cost of equity of 12% and a cost of capital of 9.94%. Answer the following
questions:
A. What is the value of the equity in this firm?
B. What is the value of the firm?
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