The companyrsquos next expected cash flow is 5 million, Financial Management

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The companyrsquos next expected cash flow is 5 million

The company’s next expected cash flow is $5 million. Following that cash flow, firm’s future cash flows are expected to grow 20% annually for each of subsequent 3 years, and 10% in the year after that. At that point, cash flows will settle down to a constant 4% per year forever. The company’s beta is equal to 1.5. Both market return and risk-free rate are 10% and 3.5%, respectively. Calculate the value of firm’s stock.

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Financial Management: The companyrsquos next expected cash flow is 5 million

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