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Using the Gordon Growth model calculate the value of the equity of an asset having the following characteristics Net cash ow to equity (year zero)

Using the Gordon Growth model calculate the value of the equity of an asset having the following characteristics

Net cash ow to equity (year zero) = $450,000 Market value of debt = $1,000,000

Cost of equity = 24%

Cost of debt = 9%

WACC = 16.7%

Expected long-term stabilized revenue growth rate = 7% Expected long-term stabilized equity cash ow growth rate = 4% Expected long-term stabilized units sold growth = 9%

Expected long-term stabilized TEV cash ow growth rate = 5%

A. $4,038,462 B. $3,340,000 C. $2,340,000 D. $3,832,353 E. $3,685,039

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