Problem 2: Valuation of Common Equity (DCF Model) Blanco Inc. plans to become public soon. The firm has $1,644,052 in preferred equity and the market value of its outstanding debt equals $3,039,264. The WACC for this firm is estimated to be 10.79%. For this example assume the current assets are zero. Use the DCF valuation model with the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 2.9% rate after Year 5. Rounding to the nearest penny, what is the value of common equity? Note: You have two sets of cash flows here, just like Problem 1. The steps for calculating Common Equity are in the text book on pages 312- 318. It is also discussed in the Module 12 "Calculating the Enterprise Value, the Value of the Firm, and the value of Common Equity". Year 6 FCF Compute GGF Period Year 1 Year 2 Year 3 Year 4 Year 5 FCF 799,587 1,390,733 2,013,212 2,201,981 3,492,474 $6,189,981 Enterprise Value of the firm Current Assets Long-Term Debt Preferred Stock Value of Common Equity NPER 5 RATE FV Compute NPV Compute PV