What is the value of the equity in this firm

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The following are the projected cash flows to equity and to the firm over the next five years:

Year CF to Equity Int (1-t) CF to Firm

1 $250.00 $90.00 $340.00

2 $262.50 $94.50 $357.00

3 $275.63 $99.23 $374.85

4 $289.41 $104.19 $393.59

5 $303.88 $109.40 $413.27

Terminal Value $3,946.50 $6,000.00

(The terminal value is the value of the equity or firm at the end of year 5.)

The firm has a cost of equity of 12% and a cost of capital of 9.94%.

Answer the following questions:

A. What is the value of the equity in this firm?

B. What is the value of the firm?

Reference no: EM132265930

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