Chiara Company’s management has made the projections shown in Table 19.5 . Use this Excel spreadsheet as a starting point to value the company as a whole. The WACC for Visit us at www.mhhe.com/bma

◗ TABLE 19.5 Cash flow projections for Chiara Corp. ($ thousands).

Historical Forecast Year: 2 1 0 1 2 3 4 5 1 Sales 35,348 39,357 40,123 36,351 30,155 28,345 29,982 30,450 2 Cost of goods sold 17,834 18,564 22,879 21,678 17,560 16,459 15,631 14,987 3 Other costs 6,968 7,645 8,025 6,797 5,078 4,678 4,987 5,134 4 EBITDA (1–2–3) 10,546 13,148 9,219 7,876 7,517 7,208 9,364 10,329 5 Depreciation 5,671 5,745 5,678 5,890 5,670 5,908 6,107 5,908 6 EBIT (Pretax profit) (4–5) 4,875 7,403 3,541 1,986 1,847 1,300 3,257 4,421 7 Tax at 35% 1,706 2,591 1,239 695 646 455 1,140 1,547 8 Profit after tax (6–7) 3,169 4,812 2,302 1,291 1,201 845 2,117 2,874 9 Change in working capital 325 566 784 54 342 245 127 235 10 Investment (change in gross fixed assets) 5,235 6,467 6,547 7,345 5,398 5,470 6,420 6,598 Visit us at www.mhhe.com/bma 498 Part Five Payout Policy and Capital Structure Chiara is 12% and the long-run growth rate after year 5 is 4%. The company has $5 million debt and 865,000 shares outstanding. What is the value per share?

CHALLENGE AppendixLO1