What is the equity value of the operating cash flows

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Question - The Gossman Guitar Company is trying to determine the current value its equity. As of its last financial statements, it had net income of $20,000 with after-tax cash earnings of $5,000. The book value of its equity was $80,000 with cash value of $15,000. The CAPEX was $12,000, depreciation was $4,000, change in working capital was $3,500, and the cash flow from net debt was $5,000. You may assume a risk-free rate of 2.0%, a beta of 1.4 and a risk premium of 6%. 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?

Reference no: EM133118561

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