se information to Firm X below for the problem.

Figures in millions

_________________________________________________________________________________________

Year 0 1 2 3

_________________________________________________________________________________________

EBIT* $200 $220 $240 Depreciation 25 27 30 Net capital expenditures 50 55 60 Total net working capital (NWC) $10 13 17 22 Current value of total debt $400 Tax rate = 25% Number of shares outstanding = 20 __________________________________________________________________________________________

*EBIT = Earnings before interest and taxes = Revenues Total costs Depreciation

Firm X has no preferred stock. The firms required rate of return (or weighted average cost of capital) is 15 percent. a) Find the free cash flow to the firm for Firm X for each year from year 1 to year 3. b) Firm Y is a comparable firm to Firm X. You estimate Firm Y's EBIT multiple (defined as value of Firm Y / Firm Y's EBIT) in year 3 to be 10. Find the stock price per share of Firm X using free cash flows from year 1 to year 3 from (a) and the terminal value (or continuing value) calculated from the comparable-multiple approach.