constant at $$200$ million, depreciation will equal capital expenditures in

each year, and working capital will not change. Torino Marine's weighted$-$

average cost of capital is $11$ percent and its tax rate is $40$ percent.

b$.$ Estimate the fair market value per share of Torino Marine's equity at

the end of $2021$ if the company has $40$ million shares outstanding and

the market value of its interest$-$bearing liabilities on the valuation date

equals $$250$ million.

c$.$ Now let's try a different terminal value. Estimate the fair market value

of Torino Marine's equity per share at the end of $2021$ under the fol$-$

lowing assumptions:

i$.$ Free cash flows in years $2022$ through $2025$ remain as above.

ii$.$ EBIT in year $2025$ is $$200$ million, and then grows at $5$ percent

per year forever.

iii. To support the perpetual growth in EBIT, capital expenditures in

year $2026$ exceed depreciation by $$30$ million, and this difference

grows $5$ percent per year forever.

iv$.$ Similarly, working capital investments are $$15$ million in $2026,$

and this amount grows $5$ percent per year forever.