Reference no: EM132993532

Corporate Valuators, Inc. is assessing the value of two companies, Capital Corp. and Earn, Inc. Capital Corp. projects the following net cash flows in the next five years, with its desired required return of 8%:

Year 1 is 8,000,000;

Year 2 is 8,800,000;

Year 3 is 9,680,000;

Year 4 is 10,648,000 and

Year 5 is 11,712,800.

While Earn, Inc. projects the following net cash flows in the next five years, with its desired required return of 6%:

Year 1 is 9,600,000;

Year 2 is 10,560,000;

Year 3 is 11,616,000;

Year 4 is 12,777,600 and

Year 5 is 14,055,360.

Problem 1: Compute for the equity value of Capital Corp.

Problem 2: Compute for the equity value of Earn, Inc.

Problem 3: What will be the minimum selling price if the Board of Directors will sell 20% of its shares in Capital Corp. to the public?