1.What is the absolute value of the annual income tax of the firm?

2.What is the annual Free Cash Flow to Owners?

3.If your firm purchases GoodStuff today and owns it forever, what is the present value of all the future FCFs that you will enjoy by owning the firm (PV_E or PVtot)? Report your answer to three decimal places.

4.What is the NPV of the project "buy this company and operate it forever." Report your answer to two decimal places.

Introduction: Valuing an Entity with the Simple Dividend Discount Model GoodStuff Inc. (GS) is a profitable entity, operating in steady-state forever. Your PE firm is considering purchasing all its stock at the asking price of: $78 Your firm believes that GS is operating at an optimum optimum cap structure of: 40% If your firm buys GS, you will operate the firm in its current steady-state condition forever. Financing Structure D + E = CAPtot $130.0 D/(D + E) = WD D $52.00 E $78.00 Key Rates 7.25% Income Tax rate 35.00% 9.16% Free Cash Flows to Owners, FCFE Numbers written like this ($85) are negative. Income Statement As Purchased Revenue $90.00 - Depreciation ($25.00) - Other Expenses ($40.00) - EBIT $25.00 -Interest ($3.7700) =EBT $21.2300 - Tax = NI (= FCF in this case) Valuation at T=0 9.16% PVE E $78.00 NPVE = PVE - E Introduction: Valuing an Entity with the Simple Dividend Discount Model GoodStuff Inc. (GS) is a profitable entity, operating in steady-state forever. Your PE firm is considering purchasing all its stock at the asking price of: $78 Your firm believes that GS is operating at an optimum optimum cap structure of: 40% If your firm buys GS, you will operate the firm in its current steady-state condition forever. Financing Structure D + E = CAPtot $130.0 D/(D + E) = WD D $52.00 E $78.00 Key Rates 7.25% Income Tax rate 35.00% 9.16% Free Cash Flows to Owners, FCFE Numbers written like this ($85) are negative. Income Statement As Purchased Revenue $90.00 - Depreciation ($25.00) - Other Expenses ($40.00) - EBIT $25.00 -Interest ($3.7700) =EBT $21.2300 - Tax = NI (= FCF in this case) Valuation at T=0 9.16% PVE E $78.00 NPVE = PVE - E