1. Snowflake Limited has been in operation for one full year (2019). Financial statements follow. Snowflake's management is interested in determining the value of the venture as of the end of 2019. Sales are expected to grow at a 20% annual rate for each of the next three years (2020, 2021, and 2022) before settling down to a long-run growth rate of 7% annually. The cost of goods sold is expected to vary with sales. Operating expenses are expected to grow at 75% of the sales growth rate (i.e., be semi-fixed) for the next three years before again growing at the same rate as sales beginning in 2023. Individual asset accounts are expected to grow at the same rate as sales. Depreciation can be forecasted either as a percentage of sales or as a percentage of net fixed assets (since net fixed assets are expected to grow at the same rate as sales growth). Accounts payable and accrued liabilities are also expected to grow with sales. Snowflake's management is interested in determining the equity value of the venture as of the end of 2019. Because Snowflake is in its startup life cycle stage, management and venture investors believe that 40% is an appropriate discount rate until the firm reaches its long-run or perpetuity growth rate. At that time it will have survived and will become a more typical firm with an estimated cost of equity capital of 20%. One million shares of common stock are outstanding Snowflake Limited Income Statement for December 31, 2019 (Thousands of Dollars) Sales Cost of goods sold Gross profit Operating expenses Depreciation EBIT Interest EBT Taxes (40%) Net income $20,000 -10.000 10.000 -7.500 -400 2.100 -100 2.000 -800 $1,200 Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 1.000 Accounts receivable 2,000 Inventories 2.000 Total current assets 5,000 Gross fixed assets 5,400 Accumulated depreciation 400 Net fixed assets 5,000 Total assets $10,000 Accounts payable $ 1,500 Accrued liabilities 1,000 Bank loan 1,000 Total current liabilities 3,500 Common stock 5,300 Retained earnings 1.200 Total equity 6,500 Total liabilities and equity $10,000 A. Project the financial statements for the next four years (2020-2023). B. Calculate the valuation cash flow for each year. C. Determine Snowflake's equity value at the end of 2019