Zeta Technologies has the following projections. It has no non-operating assets. Calculate Zeta's intrinsic value of equity using the FCFE model.
Current year
Year 1
Year 1
Year 3
FCF
NA
$1,000
$1,200
$1,248
Total debt
$3,000
$3,900
$4,290
$4,462
Interest rate on debt
6%
6%
6%
6%
Tax rate
25%
25%
25%
25%
Long-term growth rate
4%
Required return on equity
9%
A. $21,165
B. $23,282
C. $25,610
D. $28,171
E. $30,988
Answer: B
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