1. QUESTION 1 Based on the assumptions listed below, please compute the DCF per-share value of the equity of Alpha Company and place your answer in the space provided below. Answer Format example: DCF per-Share equity value of Common stock = $_ su DCF Assumptions for TNT Company a. Express sales, etc. in millions (so that $1 billion is expressed as $1,000 in the spreadsheet) and use 2 decimals, except use 4 decimals for the discount factor (which equals 1/WACC), to replicate my numbers exactly 2. Use end-of-year discounting method. c. b. Appraisal date is 1/1/20, and Forecast Period is 2020 through 2024 inclusive. Sales are forecasted to be $80 million for 2020, and sales (nominal) are projected to increase 40% each year in the forecast period through 2012. Sales growth (nominal) in the perpetuity period is projected to be 5% annually. d. Actual 2019 were $50 million. Accounts Receivables were $30 million, Accounts Payables were $25 million, and Inventory was $5 million as of 12/31/19 e. EBIT margin is projected to be 20% in 2020, 30% in 2021, 40% in 2022, 45% in 2023, 50% for 2024, and 40% for all years thereafter. The income tax rate is expected to be 40% in the forecast and perpetuity periods. f. CAPX is projected to be $20 million in 2020, and will increase by $10 million per year until 2024 when CAPX will be $60 million. Depreciation is expected to be $20 million in 2020, and will increase by 20% annually throughout the forecast period. g. The Company's nominal Return on Investment (ROI) is 21% in perpetuity period. Expected inflation is 1% annually in all years. The plowback (k) for 2024 is 25% h. To compute the WACC, assume that as of 12/31/07 the risk-free rate is 5%, risk premium is 8% and small- cap risk premium is 4.0% all nominal. Assume that beta is 1.00 when the optimal leverage ratio is 40%. Cost of debt capital is 8.333% (nominal, before accounting for tax benefits) and optimal leverage is 40% of the market value of equity plus debt. i. Cash balance is $94 million, and Long-Term Debt is $100 million, both as of 12/31/19. The firm has legal liabilities of $70 million, environmental liabilities of $80 million, and an under-funded pension fund liability of $50 million. The Book Value of the Company's assets is $253 million, and the book value of the Company's equity is $222 million, both as of 12/31/19. j. The firm also owns 220,000 acres of prime real estate that is not used for operations. This "excess" real estate was recently appraised, whereby it was valued at $1,000/acre. The cost basis is $120 million and the capital gains tax rate is 20%. k. There are 50 million common shares outstanding. The firm has 12 million management A options outstanding, each is exercisable into one share of commons stock. The exercise price on these options is $7.10 per option. Because you are not provided with a Black Scholes value of the options, you are to use the intrinsic method to determine the effect of options on the value per share. 1. QUESTION 1 Based on the assumptions listed below, please compute the DCF per-share value of the equity of Alpha Company and place your answer in the space provided below. Answer Format example: DCF per-Share equity value of Common stock = $_ su DCF Assumptions for TNT Company a. Express sales, etc. in millions (so that $1 billion is expressed as $1,000 in the spreadsheet) and use 2 decimals, except use 4 decimals for the discount factor (which equals 1/WACC), to replicate my numbers exactly 2. Use end-of-year discounting method. c. b. Appraisal date is 1/1/20, and Forecast Period is 2020 through 2024 inclusive. Sales are forecasted to be $80 million for 2020, and sales (nominal) are projected to increase 40% each year in the forecast period through 2012. Sales growth (nominal) in the perpetuity period is projected to be 5% annually. d. Actual 2019 were $50 million. Accounts Receivables were $30 million, Accounts Payables were $25 million, and Inventory was $5 million as of 12/31/19 e. EBIT margin is projected to be 20% in 2020, 30% in 2021, 40% in 2022, 45% in 2023, 50% for 2024, and 40% for all years thereafter. The income tax rate is expected to be 40% in the forecast and perpetuity periods. f. CAPX is projected to be $20 million in 2020, and will increase by $10 million per year until 2024 when CAPX will be $60 million. Depreciation is expected to be $20 million in 2020, and will increase by 20% annually throughout the forecast period. g. The Company's nominal Return on Investment (ROI) is 21% in perpetuity period. Expected inflation is 1% annually in all years. The plowback (k) for 2024 is 25% h. To compute the WACC, assume that as of 12/31/07 the risk-free rate is 5%, risk premium is 8% and small- cap risk premium is 4.0% all nominal. Assume that beta is 1.00 when the optimal leverage ratio is 40%. Cost of debt capital is 8.333% (nominal, before accounting for tax benefits) and optimal leverage is 40% of the market value of equity plus debt. i. Cash balance is $94 million, and Long-Term Debt is $100 million, both as of 12/31/19. The firm has legal liabilities of $70 million, environmental liabilities of $80 million, and an under-funded pension fund liability of $50 million. The Book Value of the Company's assets is $253 million, and the book value of the Company's equity is $222 million, both as of 12/31/19. j. The firm also owns 220,000 acres of prime real estate that is not used for operations. This "excess" real estate was recently appraised, whereby it was valued at $1,000/acre. The cost basis is $120 million and the capital gains tax rate is 20%. k. There are 50 million common shares outstanding. The firm has 12 million management A options outstanding, each is exercisable into one share of commons stock. The exercise price on these options is $7.10 per option. Because you are not provided with a Black Scholes value of the options, you are to use the intrinsic method to determine the effect of options on the value per share