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1. Consider the following information about Reaper Inc. The company has a tax rate of 20%. Cash flows will continue after year 3 and grow

1. Consider the following information about Reaper Inc.

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The company has a tax rate of 20%. Cash flows will continue after year 3 and grow at 4% annually.

a) Calculate the weighted average cost of capital

b) What is the value today of cash flows received in years 1-2?

c) What is the value today of remaining cash flows from year 3 onward?

Year 1 2. 3 Free Cash Flow 10 20 40 | 5% Debt 2,500 7,500 Ke 8% Equity

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