Calculates the value of a firms common stock

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Reference no: EM13872108

Utilizing the free cash flow approach calculates the value of a firm's common stock given the following information:

Market value of debt = $ 7,500,000.00

Market value of preferred stock = $ 2,500,000.00

Shares of common stock outstanding = 100,000

Growth rate of 15% for 3 years, followed by a 9% annual growth rate, thereafter

Estimated WACC of 12%

Past year's FCF = $ 450,000

If yield curves on average were flat, what would this say about liquidity premiums in the term structure? Would you be more or less willing to accept the pure expectations theory?

Would you expect the yield maturity on a $ 1,000 par bond that has an annual coupon rate of 6%, is currently priced at $ 985, and matures in 10 years to be greater or less than 6% and why?

Reference no: EM13872108

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