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After the valuation of the firm was done, the analyst reduced the value by 35% to reflect the illiquidity discount While you agree with the

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After the valuation of the firm was done, the analyst reduced the value by 35% to reflect the illiquidity discount While you agree with the analyst's estimate of after-tax cash flows for this firm, and her assumption that the firm is in stable growth, growing 5% in perpetuity, you disagree on other counts. In particular, you note that the average beta of other firms in this kind of service business is 1.1, and that the average market value debt to capital ratio of other firms in this business is 10%. You believe that this private firm will have a similar debt ratio after the sale to Blockbuster. Estimate the correct value of this firm for sale to Blockbuster. (You can still assume a riskfree rate of 5%, and a risk premium of 6.3%) (6 points)

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