(25 points) TYU co is a dominant, stable enterprise with a good visibility of orders for the coming few years. Use all data given for TYU co (Financial statements & assumptions) in order to complete the following requirements:

1. Compute TYU co s current ratio, asset turnover & operating margin for year 2020
2. Build a pro format income statement + expected FCFE for 3 years
3. Using CAPM, compute the cost of equity for TYU co, knowing that its 3-year beta is 0.81, the 10-year risk free rate is 1%pa and the expected market return is 7.5%pa
4. Using the equity method compute the intrinsic value of TYU cos Equity. Details on the Terminal Value are given in the assumptions for the 3 year projections below.

5. Bonus Question: (5 points)

Assume the management of TYU co wishes to maintain a stable capital structure instead of repaying its debt. Compute TYU cos equity, using a constant growth dividend model. (use data from TYU co.s 2020 income statement and 2019-2020 balance sheet as well as your previous calculations)

Assumptions for the 3-year projections:

Sales growth: 2.5%pa,

Operating margin will be constant at 28%

Depreciation will remain constant (use 2020 data)

Investments in long-term assets will amount to 80 Million Euros in 2021 and 30 million per year in the following 2 years.

Net Working Capital will be 26% of sales

All financial debt will be repaid linearly over 3 years

At the end of year 3 (2023), compute the Terminal Value as a growing perpetuity of FCFE 2023 (1.5%pa growth)

DATA
TYU co Balance Sheet in millions
At 12/31/2019 and 12/31/2020
Assets in millions	2019	2020
Total current assets	450	480
Net plant and equipment	900	840
Total assets	1350	1320
Liabilities and Equity	2019	2020
Total current liabilities	330	285
Long term debt	225	225
Common stock (Paid in Capital)	300	300
Retained earnings	495	510
Total liabilities and equity	1350	1320
TYU co Income Statement in millions
For the Year Ended 12/31/2020
Sales (all credit)		750
Less: cost of goods sold		405
Gross profits		345
Less: operating expenses		0
General and administrative		42
Depreciation		90
Operating income		213
Interest expense		12
Earnings before taxes		201
Taxes		60
Net income		141