(25 marks) You have the following information about a company. Sales in 2019 were 2000 million. Sales are expected to grow at a rate of 15% in 2020, and afterwards the growth rate will drop to 3%. EBIT margin is expected to stay constant at 15%. The corporate tax rate is 40%. Net working capital each year is expected to stay constant at 10% of next year's sales. To generate sales growth, each year t, capital expenditure net of depreciation (i.e., Capex- Depreciation) is expected to be 1/3 of the sales increase from year t to year t+1. The debt-to-equity ratio (D/E) of the company is expected to stay constant at 1/2 and its equity cost of capital is 15%. The firm has perpetual bonds outstanding with a coupon rate of 9% paid annually. The bonds are currently selling at par and have a AAA credit rating.

Wacc: 11.8% (depreciation amount)

b. (10 marks) Compute the value of the company at the beginning of 2020 using the WACC method. You may assume that all cash flows occur at the end of each year.