Question 1. a) Use discounted cash flow analysis with a discount rate of 12 percent PA to calculate the company's net present value at 30 June 2020 2018-2019 FFY Expected % Change 2019-2020 FFY Gross Revenue 1200 3% 1236 Fixed Costs 250 1% 252.5 Variable Costs 700 2.5% 717.5 Working Capital 120 3% 123.6 Annual Investment 125 3% 128.75 2018-2019 FFY: 1200 (Gross revenue) - 250 (Fixed Costs)- 700 (Variable Costs) - 75 ( depreciation) - 24 (loan interest repayment) = 151 (EBIT) Operating Cash Flow = 151 (EBIT) - 151x0.3 (Tax) = $105.7 Discounted Cash Flow = 105.7(1/1+0.12)^0 = $105.7 2019-2020 FFY: 1236 (Gross revenue) - 252.5 (Fixed Costs) - 717.5 ( Variable Costs) - 75 (depreciation) - 24 (loan interest repayment) = 167 (EBIT) Operating Cash Flow = 167 (EBIT) - 167x0.3 (Tax) = $116.9 Discounted Cash Flow = 116.9(1/1+0.12)^1 = $104.4 Present Value (PV): 105.7 + 104.4 =210.1 PV=210.1+120+123.6 = 453.7 NPV = 453.7-120-123.6=b) Use an alternative method to validate your estimate of the company's NPV c) On 25 June 2020, the company's share price closed at $8.50. In light of valuations above, what advice would you give an investor who is considering buying shares in the company