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plz show calculations General Inc. owns 20% of the common shares of Bronson Ltd. The other 80% are owned by the Bronson family. General acquired

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plz show calculations

General Inc. owns 20% of the common shares of Bronson Ltd. The other 80% are owned by the Bronson family. General acquired the shares 11 years ago through a financing transaction. Each year, General has received a dividend from Bronson. Bronson has been in business for 75 years and continues to have strong operations and cash flows. General must determine the fair value of this investment at its year end. Since there is no market on which the shares are traded, General must use a discounted cash flow model to determine fair value. General management intends to hold the shares for six more years, at which time they will sell the shares to the Bronson family under an existing agreement for $800,000. There is no uncertainty in this amount. Management expects to receive dividends of $50,000 for each of the six years, although there is a 20% chance that dividends could be $30,000 each year. The risk-free rate is 4% and the risk-adjusted rate is 7%. Instructions (a) Calculate the fair value of the investment in Bronson using the traditional approach. (b) Calculate the fair value of the investment in Bronson using the expected cash flow approach. (c) In this case, which discounted cash flow model is better and why

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