Problem:
Nico Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash are expected to grow at a constant rate of 5 percent forever. If thefirm's average cost of capital is 15 percent, the market value of the firm's debt and preferred stock is $500,000 and Nico has 100,000 shares of stock outstanding, what is the value of Nico's stock?
Note: Please provide through step by step calculations.