5. To determine the stock value based on the discounted free cash flow method:

a. Forecast the free cash flows using the historical data from the financial statements downloaded from Yahoo! Finance to compute the three-year average of the follow- ing ratios: i. EBIT/sales ii. Tax rate (income tax expense/income before tax) iii. Property plant and equipment/sales iv. Depreciation/property plant and equipment v. Net working capital/sales

b. Create an empty timeline for the next five years.

c. Forecast future sales based on the most recent year's total revenue growing at the LT growth rate from Reuters for the first five years.

d. Use the average ratios computed in part

(a) to forecast EBIT, property, plant and equipment, depreciation, and net working capital for the next five years.

e. Forecast the free cash flow for the next five years using Eq. 10.2.

f. Determine the horizon enterprise value for year 5 using Eq. 10.6 and a long-run growth rate of 4% and a cost of capital for GE of 11%. Determine the enterprise value of the firm as the present value of the free cash flows. h. Determine the stock price using Eq. 10.4. Note that your enterprise value is in $ thousands and the number of shares outstanding is in billions.