What price should pay for the firm

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Reference no: EM132791290

Problem 1: Renu Company Ltd. currently earns after-tax cash flow of $50,000 per year. On the basis of a review of similar risk investment opportunities, you expect to earn 7% rate of return on the proposed purchase. What price should you pay for the firm if after-tax cash flows of the firm are expected to remain at $50,000 per year for the first two years, followed by a constant annual growth rate of 3% from year 3 onwards?

Reference no: EM132791290

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