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What is the equity value of the operating cash flows

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The Gossman Guitar Company is trying to determine the current value its equity. As of its last financial statements, it had net income of $18,000 with after-tax cash earnings of $5,500. The book value of its equity was $50,000 with cash value of $10,000. The CAPEX was $10,000, depreciation was $4,000, change in working capital was $3,000, and the cash flow from net debt was $4,000. You may assume a risk-free rate of 2.0%, a beta of 1.5 and a risk premium of 7%. After a 5-year high growth period, the stable growth will be 3%, but the cost of equity will remain the same. Given this information, what is the equity value of the operating cash flows?

Please use excel to show each step and save it as a picture if it is convenient. Thank you.

Reference no: EM132796037

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