A guest on the popular show Great Tank is attempting to raise money for her new...

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A guest on the popular show Great Tank is attempting to raise money for her new company, Feline Fancy, which makes cat toys. The potential investor wants to value the company, which is privately held. Because of this, she uses the pure play approach to determine that the appropriate WACC for the company is 8 percent. The relevant tax rate is 21 percent. Feline Fancy currently has €40 million in debt and 3.5 million shares outstanding, Sales this year are expected to be €30 million, and that amount is expected to grow at 15 percent per year for the following four years. After that, sales are expected to grow at 2 percent indefinitely. EBIT this year will be €10 million. EBIT, depreciation, capital spending, and the change in net working capital will grow at the same rate as sales. You have already made the following estimations for the next five years (numbers are in millions): EBIT Depreciation Taxes Change in NWC Capital spending Year 1 €10.00 1.50 2.10 0.80 2.40 Year 2 €11.50 1.73 2.42 0.92 2.76 Year 3 €13.23 1.98 2.78 1.06 3.17 Year 4 €15.21 2.28 3.19 1.22 3.65 Year 5 €17.49 2.62 3.67 1.40 4.20 Instructions: 1. What value would you assign to Feline Fancy as a whole? What price per share would you assign? Support your decisions with calculations. (15 points) 2. Explain how to determine the appropriate cost of debt for the company. Does it make a difference if the company's debt is privately placed as opposed to being publicly traded? (5 points) A guest on the popular show Great Tank is attempting to raise money for her new company, Feline Fancy, which makes cat toys. The potential investor wants to value the company, which is privately held. Because of this, she uses the pure play approach to determine that the appropriate WACC for the company is 8 percent. The relevant tax rate is 21 percent. Feline Fancy currently has €40 million in debt and 3.5 million shares outstanding, Sales this year are expected to be €30 million, and that amount is expected to grow at 15 percent per year for the following four years. After that, sales are expected to grow at 2 percent indefinitely. EBIT this year will be €10 million. EBIT, depreciation, capital spending, and the change in net working capital will grow at the same rate as sales. You have already made the following estimations for the next five years (numbers are in millions): EBIT Depreciation Taxes Change in NWC Capital spending Year 1 €10.00 1.50 2.10 0.80 2.40 Year 2 €11.50 1.73 2.42 0.92 2.76 Year 3 €13.23 1.98 2.78 1.06 3.17 Year 4 €15.21 2.28 3.19 1.22 3.65 Year 5 €17.49 2.62 3.67 1.40 4.20 Instructions: 1. What value would you assign to Feline Fancy as a whole? What price per share would you assign? Support your decisions with calculations. (15 points) 2. Explain how to determine the appropriate cost of debt for the company. Does it make a difference if the company's debt is privately placed as opposed to being publicly traded? (5 points)