Solar Circuits is a manufacturing company that generated $75 million in after-tax operating income in the most recent year. It had book equity of $450 million, debt outstanding (book and market) of $150 million and a cash balance of $100 million. The company expects to maintain its existing return on capital in perpetuity. It also expects its after-tax operating income to grow 12% a year for the next 3 years, and 3% thereafter. If the cost of capital for the firm is 8.8%, what is the value of equity today?

The correct answer is 1160 million dollar, please explain.

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