(Challenge problem) The last 5 years’ results for Niccair Corp. are given below. Value the company’s stock based on a model of FCF growth of your own design and the following additional facts. (This is not an easy problem, and it has no explicit answer—valuation is often like that!)

• Niccair’s 2003 year-end debt is $750 million.

• Niccair’s 2003 year-end cash is $50 million.

• The company has a cost of debt of rD = 5%.

• The company has 44,080,000 shares outstanding; the end-2003 share price is $37.

• Niccair’s share β = 0.437, rf

= 3%, and E r( ) M = 12%.

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A B C D E F 1 2 3 Net income 4 Depreciation 5 Changes in net working capital 6 Capital expenditures 7 Net interest paid before taxes 8 Tax rate 31-Dec-12 31-Dec-11 $35,800,000 $116,300,000 NICCAIR CORPORATION, 2011-2015 31-Dec-15 31-Dec-14 31-Dec-13 $105,300,000 $128,000,000 $122,100,000 $161,700,000 $155,000,000 $148,800,000 $145,100,000 $141,600,000 -12,600,000 268,300,000 491,300,000 233,000,000 213,400,000 -181,300,000 -192,500,000-185,700,000 -158,400,000 -154,000,000 -41,100,000 -34,600,000 -46,900,000 -50,600,000 -45,500,000 37.84% 34.56% 31.03% 32.62% 16.94%