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You are considering acquiring a firm that you believe can generate a cash flow of $120,000 next year and the cash flows will grow at
You are considering acquiring a firm that you believe can generate a cash flow of $120,000 next year and the cash flows will grow at a 3% rate forever. The firm is available for sale for $1,300,000. Assume that the beta of the firm is 1.2 the risk-free rate is 4 percent and the expected market risk premium is 7 percent.
What is the present value of expected cash flows?
Group of answer choices
$2,307,692.31
$1,276,595.74
$842,105.26
$1,318,681.32
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