2. You are given the following information about Tjeldbergtind, a low cost airline. NOK million 2021 2020 2019 3000 4830 600 Interest expense Interest income 160 215 40 Earnings before tax (11152) 6744 9537 Reported tax expense (950) 215 635 (Note that 2021 tax expense is negative. Dr deferred tax asset, Cr tax expense) a) Determine, for 2020 and 2021, (i) The effective tax rate (ii) The tax benefit of debt (iii) Tax attributable to operating income Operating income after tax (iv) Assume that pre-tax operating income equals earnings before interest and tax. (6 marks) b) Currently Tjeldbergtind pays no dividends. Can you still use the dividend discount model or something similar to value the stock? Do not discuss discounted free cash flow methods in this part of the question (2 marks) c) Explain, with a mathematical expression, the free cash flow to equity based valuation method. Explain how you would derive the cash flows used. (8 marks) d) Assume clean surplus accounting. Common shareholders' equity at the end of 2019 was 52,600 million. Tjeldbergtind's cost of equity capital is 5% Calculate Tjeldbergtind's abnormal earnings in 2020 and 2021. Give you answers to the nearest NOK million. (3 marks) e) Write down and briefly explain the formular for abnormal earnings based valuation. Under what circumstances would you arrive at the same valuation as with the free cash flow to equity based method? (6 marks) 2. You are given the following information about Tjeldbergtind, a low cost airline. NOK million 2021 2020 2019 3000 4830 600 Interest expense Interest income 160 215 40 Earnings before tax (11152) 6744 9537 Reported tax expense (950) 215 635 (Note that 2021 tax expense is negative. Dr deferred tax asset, Cr tax expense) a) Determine, for 2020 and 2021, (i) The effective tax rate (ii) The tax benefit of debt (iii) Tax attributable to operating income Operating income after tax (iv) Assume that pre-tax operating income equals earnings before interest and tax. (6 marks) b) Currently Tjeldbergtind pays no dividends. Can you still use the dividend discount model or something similar to value the stock? Do not discuss discounted free cash flow methods in this part of the question (2 marks) c) Explain, with a mathematical expression, the free cash flow to equity based valuation method. Explain how you would derive the cash flows used. (8 marks) d) Assume clean surplus accounting. Common shareholders' equity at the end of 2019 was 52,600 million. Tjeldbergtind's cost of equity capital is 5% Calculate Tjeldbergtind's abnormal earnings in 2020 and 2021. Give you answers to the nearest NOK million. (3 marks) e) Write down and briefly explain the formular for abnormal earnings based valuation. Under what circumstances would you arrive at the same valuation as with the free cash flow to equity based method? (6 marks)