1. Write down the appropriate discount rate for each discounted cash flow model below.

Model DDM FCFF FCFE

Discount rate ? ? ?

2. The free cash flow to the firm is $300 million in perpetuity (growth rate of FCFF is 0), the cost of equity equals 14%, and the WACC is 10%. If the market value of the debt is $1 billion, what is the value of the firm's total equity using the free cash flow valuation approach? Show all your work (do not just give a final number). Hint: recall what we do for the Gordon Growth Model with g=0.