1.Use FCFF to determine the value of a company's stock with the following:

Year 0 sales of $150 million, growth in years 1 through 3 of 3%, year 4 onward of 2%

EBIT margin of 25%

Tax rate of 22%

Depreciation % of sales of 6%

Capex % of sales of 6%

NWC % of sales of 25%

Market value of debt at $280 million with current YTM at 4.75%

Equity beta of 0.92

RFR 2.5%

Market risk premium 5.5%

Cash on balance sheet of $1.25 million

Shares outstanding of 650,000

Market value of equity $460 million

$691.77

$472.19

$722.02

$524.28

2.Firm A trades at $53/share with FY1 earnings estimated at $4.25/share.It's potential payout rate is approximately 65% and it has a required rate of return of 7.5% with a growth rate of 2%.You hold 100 shares of Firm A.Based on this information, should you buy additional shares or sell the shares that you own?

$51.95; sell the shares

$50.23; buy more shares

$51.95; buy more shares

$50.23; sell the shares

3.What are the three levels of the top down approach?

industry, sector, company

currency, sector, firm

firm, unyielding, pugnacious

market, industry, company