2. Corporate valuation model Red Rabbit Builders's free cash flows (FCFS) are expected to grow at a constant long-term growth rate (gl) of 16% per year into the future. Next year, the company expects to generate a free cash flow of $9,500,000. The market value of Red Rabbit's outstanding debt and preferred stock is $61,071,429 and $33,928,572, respectively. Red Rabbit has 2,250,000 shares of common stock outstanding, and its weighted average cost of capital (WACC) is 23%. Given the preceding information, complete the adjacent table (rounding each value to the nearest whole dollar), and assuming that the firm has not had any nonoperating assets in its balance sheet. Value Term Value of Operations Value of Firm's Common Equity Value of Common Stock (per share) $ Oops, a more careful review of Red Rabbit's balance sheet actually reports a $2,550,000 portfolio of marketable securities. How does this new information affect the intrinsic value of Red Rabbit's common equity (expressed on a per-share basis) assuming no other changes to the Red Rabbit financial situation? Review the statements below and select those that accurately describe Red Rabbit's financial situation. Check all that apply. The intrinsic value of Red Rabbit's common stock decreases with the inclusion of the company's marketable securities portfolio into the analysis. The greater the market value of the marketable securities portfolio, the smaller the company's total intrinsic (entity) value. The intrinsic value of Red Rabbit's common stock increases with the inclusion of the company's marketable securities portfolio into the analysis. The revised intrinsic value of Red Rabbit's common stock is $19.23 per share. Grade It Now Save & Continue