Please show how to solve step by step with instructions and what formulas in Excel to use. Thank you.

River Rat Rafters sells virtual rafting trips. The firm has an offer from a hedge fund to buy the company. The board of directors need to know the value of common equity and have asked for your opinion. The firm has $1,847,157 in preferred equity and the market value of its outstanding debt equals $2,707,096. The WACC for this firm is estimated to be 8.08%. Use the DCF valuation model with the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 3.6% rate after Year 5. Rounding to the nearest penny, what is the value of common equity? Period Free Cash Flow Year 1 $1,355,865 Year 2 $1,034,136 Year 3 $2,211,723 Year 4 $2,704,212 Year 5 $3,394,012

Answer: 56,839,763.08

How: 1. Value of operations using the DCF & cost of capital as the rate (use the decimal of the cost of capital for example 6.9% =.069) In Excel use the NPV formula=npv(cost of capital, YR1 CF, YR2 CF, YR3 CF, YR 4CF, YR5 CF) = PV of the cash flows Next, add the terminal value to the Cash flow value: Calculate the terminal value by a. multiplying year 5 cash flow by 1+growth rate to get the next year's value b. divide the next year's value by (cost of capital - growth rate) Note: use the decimal of the interest rates. c. bring the value to the present by calculating the PV. In Excel =pv(rate,years,0,-FV) where the rate is the cost of capital, years is 5, 0 payment, and the FV is the negative of the value calculated in b.

The terminal value + pv of cash flows = operating value 2. Equity value = operating value - debt; subtract the debt from the operating value calculated above.