Question: Problem 8 - 1 0 You are building a free cash flow to the firm model. You expect sales to grow from $ 1 .

Problem

8 - 10

You are building a free cash flow to the firm model. You expect sales to grow from $

1.2

billion for the year that just ended to $

1.44

billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for

5

years, and then at a constant rate of

3.213729 %

for year

6

and onward after that. Use the following information to calculate the value of the equity on a per

-

share basis.

Assume that the company currently has $

432

million of net PP&E

.

The company currently has $

144

million of net working capital.

The company has operating margins of

11

percent and has an effective tax rate of

31

percent.

The company has a weighted average cost of capital of

10

percent. This is based on a capital structure of two

-

thirds equity and one

-

third debt.

The firm has

3

million shares outstanding.

Do not round intermediate calculations. Round your answer to the nearest cent.

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