Earnings for the firm with the cash flow

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Reference no: EM131312508

Calculate the value of the following two firms using the appropriate methodology.

Identify the method.

a. Earnings for the firm with the cash flow for the next 5 years at $500, $700, $1000, $1200 and $500. The firm then dissolves (that is its cash flow after five years is zero). The discount rate for the firm is 12%.

b. The firm experiences the same first years as in (a). It then experiences steady state growth at 5% per year.

Reference no: EM131312508

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