You're a social media analyst. Linkbook generated $ 2.3 billion in revenues in the current financial year.

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Question:

You're a social media analyst. Linkbook generated $ 2.3 billion in revenues in the current financial year. Linkbook earned 123 million in after-tax operating income in the current year. You expect After tax operating margin (ATOM) to triple over the next 3 years, increasing in a linear manner every year. After 3 years, ATOM will become constant in perpetuity. You estimate that revenues will grow at 8% for the next 3 years and 4% thereafter. The cost of capital will be 9% for the next 3 years and 8% thereafter. Working capital needs are negligible. Linkbook is expected to have $35 million in CapEx and $42 million in depreciation for each of the next 3 years. You estimate that return on capital will be 8% forever. Linkbook has $78 million in debt (market) outstanding and has a cash balance of $57 million. It has 75 million shares outstanding

a) Estimate the free cashflows to the firm each year for the next 3 years.

b) Estimate the value of the firm at the end of the third year (terminal value)

c) Estimate Linkbook's value of equity per share today