1. (25 pts) The SoftTec Products Company is a successful small, rapidly growing, closely held corporation. The equity owners are considering selling the firm to an outside buyer and want to estimate the value of the fim. Following is last year's income statement (2013) and projected income statements for the next four years (2014-2017). Sales are expected to grow at an annual 7 percent rate beginning in 2018 and continuing thereafter fs Thousands) Actual 2013 150 -75 75 -30 -60 Net Sales Cost of Goods Sold Gross Profit SG&A Expenses Depreciation EBIT Interest EBT Taxes (40% rate) Net Income 2014 200 -100 100 -40 -10 SO -3.5 46.5 -18.6 27.9 Projected 2015 2016 250 300 -125 -150 125 150 -50 -12.5 -15 623 75 -3.5 59 71.5 -236 -28.6 35.4 42.9 -75 37.5 -35 34 -13.6 2017 350 -175 175 -70 -175 87.5 -35 84 -336 50.4 20.4 Selected balance sheet accounts at the end of 2013 were as follows. Net fixed assets were $50,000. The sum of the required cash, accounts receivable, and inventories accounts was $50,000, Accounts payable and accruals totaled $25,000. Each of these balance sheet accounts was expected to grow with sales over time. No changes in interest-bearing debt were projected and there were no plans to issue additional shares of common stock. There are currently 10,000 shares of common stock outstanding Data have been gathered for a "comparable" publicly-traded firm in the same industry that SoftTec operates in. The cost of common equity for this other firm, Wakefield Products, was estimated to be 25 percent. Soft Tec has survived for a period of years. Management is not currently contemplating a major financial structure change and believes a single discount rate is appropriate for discounting all cash flows A. Project Soft Tee's income statement for 2018 B. Determine the annual increases in net operating working capital (NOWC) and capital expenditure (CAPEX) for SofTec for the year 2014 to 2018 C. Project annual equity valuation cash flow for the years 2014 to 2018, D. Estimate Soft Tee's terminal value cash flow at the end of 2017, E. Estimate Soft Tee;s equity value in dollars and per share at the end of 2013