ABC develops computer products for consumers in Australia. In June 2014, a team of analysts issued a research report that valued ABCs stock at $8.46 per share, compared to the then-current market price of $11. The research reports discounted cash flow valuation table is reproduced below. The 2014 figures are as reported by ABC, but the 2015 through 2022 figures are analysts forecasts. Key assumptions include a weighted average cost of capital of 12%, cost of equity 9% and a perpetual growth rate of 1%. All dollar amounts are in millions except share value.

1. What role does the 9% cost of equity play in the free cash flow valuation analysis in this case? How about the role of cost of equity in the abnormal earnings valuation analysis?

2, Explain in detail to someone unfamiliar with present value calculations about how the Present value 20152022(i.e., $129.1957) is computed. Please show your detailed calculation with explanations.

3, Explain in detail how the figure $312.2458 for Present value beyond 2022 is computed. Please show your detailed calculation with explanations.

4, Why does the analyst team subtract an amount for net debt in arriving at Equity value in this case? (Note: The term net debt is defined for spreadsheet purposes as financial liabilities (e.g., loans) minus any financial assets (e.g., money market investments))