What will be the market value of the firms common equity

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Reference no: EM13835103

The Jimmer Company has a historical growth in its free cash flows of 4% with little variability. With the addition of a new plant and equipment, however, you expect that free cash flows will grow 2% in year 1, 4% in year 2, 8% in years 3 to 5, and 5% thereafter. The firm’s last free cash flow was $200,000. The firm has a required rate of return of 10%. The book value of operating assets is $1,000,000. The market value of non-operating assets is $900,000. The market value of the firm’s debt is $1,500,000 and the market value of the preferred stock is $500,000. What will be the market value of the firm’s common equity?

Reference no: EM13835103

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