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Merry Meerkat Marketing Inc.'s free cash flows (FCFS) are expected to grow at a constant long-term growth rate (SL) of 13% per year into the
Merry Meerkat Marketing Inc.'s free cash flows (FCFS) are expected to grow at a constant long-term growth rate (SL) of 13% per year into the future. Next year, the company expects to generate a free cash flow of $10,000,000. The market value of Merry Meerkat's outstanding debt and preferred stock is $75,000,000 and $41,666,667, respectively. Merry Meerkat has 6,750,000 shares of common stock outstanding, and its weighted average cost of capital (WACC) is 19%. 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 Firm's Common Equity Value of Common Stock (per share) $ Oops, a more careful review of Merry Meerkat's balance sheet actually reports a $2,370,000 portfolio of marketable securities. How does this new information affect the intrinsic value of Merry Meerkat's common equity (expressed on a per-share basis) assuming no other changes to the Merry Meerkat financial situation? Review the statements below and select those that accurately describe Merry Meerkat's financial situation. Check all that apply. The greater the market value of the marketable securities portfolio, the smaller the company's total intrinsic (entity) value. The revised intrinsic value of Merry Meerkat's common stock is $7.76 per share. The intrinsic value of the company's common stock isn't affected by the new information. The intrinsic value of Merry Meerkat's common stock increases with the inclusion of the company's marketable securities portfolio into the analysis
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