Calculate the value of department store equity

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A department store estimates that annual sales will be $140,000, cost of goods sold will be 59% of sales, and annual general and administrative costs will be $30,000. It expects these cash flows to stay the same forever. The store holds $80,000 in perpetual 8.4 percent debt, faces a tax rate of 20 percent, and has a cost of equity equal to 14 percent. Use the flow-to-equity approach to calculate the value of this department store's equity.

Reference no: EM133121673

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