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Corner Company is estimated to generate $18 million in available cash flow in the first year, and this is expected to grow at a constant rate of 5% per year. The company has no debt or preferred stock and its weighted average cost of capital (WACC) is 9%. Calculate the value per share, considering that the company has $32 million in outstanding shares.

Corner Company is estimated to generate $18 million in available cash flow in the first year, and this is expected to grow at a constant rate of 5% per year. The company has no debt or preferred stock and its weighted average cost of capital (WACC) is 9%. Calculate the value per share, considering that the company has $32 million in outstanding shares.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 6MC
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  1. Corner Company is estimated to generate $18 million in available cash flow in the first year, and this is expected to grow at a constant rate of 5% per year. The company has no debt or preferred stock and its weighted average cost of capital (WACC) is 9%. Calculate the value per share, considering that the company has $32 million in outstanding shares.
  2. Calculate the nominal rate of return on a perpetual preferred stock with a par value of $200, a dividend of 9% of par value, and a current market price of $100.
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