# Summarize and discuss the implications of the findings for the business or potential business transaction.----------------McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is \$100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds \$325,000 of non-operating marketable securities. Its long-term debt is \$1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding.McCaffrey's value of operations - \$2,675,000The company's total value - \$3,000,000The estimated value of common equity - \$2,000,000The estimated per-share stock price - \$40

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Summarize and discuss the implications of the findings for the business or potential business transaction.

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McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is \$100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds \$325,000 of non-operating marketable securities. Its long-term debt is \$1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding.

1. McCaffrey's value of operations - \$2,675,000
2. The company's total value - \$3,000,000
3. The estimated value of common equity - \$2,000,000
4. The estimated per-share stock price - \$40
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Step 1

Computation of McCaffrey’s value of operation:

Hence, the value of operation is \$2,675,000.

Step 2

Computation of total value of the company:

Hence, the total value is \$3,000,000.

Step 3

Computation of estimated value of total equity:

Hence, the value of equity is \$2,000,000.

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