3. Corporate valuation model

Red Rabbit Builderss free cash flows (FCFs) are expected to grow at a constant long-term growth rate (gLgL) 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 Rabbits 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.

Term	Value
Value of Operations
Value of Firms Common Equity
Value of Common Stock (per share)

Oops, a more careful review of Red Rabbits balance sheet actually reports a $2,550,000 portfolio of marketable securities. How does this new information affect the intrinsic value of Red Rabbits 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 Rabbits financial situation. Check all that apply.

The intrinsic value of Red Rabbits common stock decreases with the inclusion of the companys marketable securities portfolio into the analysis.

The intrinsic value of Red Rabbits common stock increa ses with the inclusion of the companys marketable securities portfolio into the analysis.

The intrinsic value of the companys common stock isnt affected by the new information.

The revised intrinsic value of Red Rabbits common stock is $19.23 per share.