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Calculate the value of the equity of an asset

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Question - Using the Gordon Growth model calculate the value of the equity of an asset having the following characteristics

Net cash flow to equity (year zero) = $450,000

Market value of debt = $1,000,000

Cost of equity = 24%

Cost of debt = 9%

WACC = 16.7%

Expected long-term stabilized revenue growth rate = 7%

Expected long-term stabilized equity cash flow growth rate = 4%

Expected long-term stabilized units sold growth = 9%

Expected long-term stabilized TEV cash flow growth rate = 5%

A. $4,038,462

B. $3,340,000

C. $2,340,000

D. $3,832,353

E. $3,685,039

Reference no: EM132724583

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