Consider HES Company's financial statements given below. Assume the Company's beta is estimated to be 1.5, risk free rate 2%, and market risk premium 10%. Furthermore, assume the company has a long-term growth rate for 2% after the fifth year and net income and comprehensive income will be identical.
What is the company's value using the following methods, for each method and part, provide your analysis and discussion.
a) Residual Income
b) Market to Book
c) Free Cash Flow to Equity (FCFE)
d) Free Cash Flow to Company (FCFC, Debt and Equity)
E) If Owners decide to issue 1,000,000 common shares (assume no floatation cost), how much would be the value for each share? Which valuation method would you prefer, why?
F) Analyze and explain which one of the above valuation methods provides a better and more realistic valuation, for an investor, an acquiring company, and a lender?

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HES Company Financial Statements Income Statements Year +1 $1,976,000 $2,074,800 $2,178,540 $2,287,467$2,401,840 1,213,659 1,274,3421,338,059 1,404,962 1475,210 S762,341 S800,458$840,481 $882,505 S926,630 Year +2 Year +3 Year +4 Year +5 Revenues Cost of Sales Gross Profit Accounting Advertising & Promotion Bank Charges Compensation & Benefits Consulting Fees Insurance Lease Facilities 6,000 15,000 41,496 246,643 2,400 1,000 336,000 6,300 12,360 43,571 254,042 0 1,050 336,000 6,615 12,731 45,749 261,663 0 1103 336,000 6,946 13,113 48,037 269,513 0 1,158 336,000 7,293 13,506 50,439 277,598 0 1,216 336,000 500 500 600 1,800 2,700 720 1,800 4,200 1,800 663,159 $99,182 4,916 $94,266 43,199 51,067 17,873 $33,194 500 510 612 1,836 2,754 742 1,836 4,410 1,800 668,323 $132,135 $161,226$191,936 $224,354 4,916 $127,219 40,274 86,945 30,431 $56,514 500 520 624 1,873 2,809 764 1,873 4,631 1,800 679,255 690,569702,276 500 531 637 1,910 2,865 787 1,910 4,862 1,800 500 541 649 1,948 2,923 810 1,948 5,105 1,800 Legal & Professional Licenses & Fees Maintenance Miscellaneous Office supplies Security Telephone Utilities Website Total Operating Exp. EBIDTA 4,916 $156,310 $187,020 $219,438 37,059 119,251 41,738 $77,513 4,916 4,916 Depreciation Operating Profit Interest Expense Earnings Before Taxes Income Taxes Net Income 33,524 153,496 53,724 $99,772 29,639 189,799 66,429 $123,370 Balance Sheets Begin S33,150 S110,697 S210,697$243,259 S293,834 S363,370 25,000 425,000 424,781 446,020 468,321 491,737 28,000 $486,150 $563,697 $663,478$717,279 $790,155 $883,107 Year +1Year +2 Year +3 Year 4Year+5 Cash Inventory Prepaid Leases 28,000 28,000 28,000 28,000 28,000 Total Current Assets Fixed Assets Less: Depreciation Net Fixed Assets Total Assets 33,850 0 33,850 $520,000 $592,631 $687,496$736,382 $804,341 $892,378 33,850 4,916 28,934 33,850 9,832 24,018 33,850 14,747 19,103 33,850 19,664 24,579 14,186 33,850 9,271 Accounts Payable Long Term Debt Total Liabilities 0 468,000 438,529 406,133 370,522 331,377288,346 468,000 507,437 545,787517,159 485,345 450,013 68,908 139,654 146,637 153,968 161,667 Owner's Equity Paid-in Capital Retained Earnings Total Liabilities & Equity $520,000 $592,631 $687,496 $736,382 $804,341$892,378 52,000 52,000 52,000 52,000 52,000 52,000 0 33,19489,709 167,223 266,996 390,365