3. Actual Forecast ($ millions) Yr 0 Yr 1 Sales $ 500 530 Operating Costs 250 260 EBIT 250 280 Interest Expense 8 20 EBT 242 260 Taxes (25%) 60.5 65 Net Income $ 181.5 195 Dividends 166.3 170 Add to RE 15.2 25 Balance Sheet Cash $ 20 10 Receivables 82 83 Inventories 100 108 Current Assets 202 201 Net Fixed Assets 145 175 Total Assets 347 376 Accounts Payable 40 60 Notes Payable 10 15 Accruals 23 20 Current Liabilities 73 95 Bonds 70 60 Common Stock 160 142 Retained Earnings 54 79 Total Liab & Eq $ 347 376 a. Assume the WACC= 9% and growth rate of 5% after year

1. Find FCF for Year 1.

b. Find the horizon value of FCFs after year 1 and the value of the corporate using the corporate value method.

c. Find the market value of the common stock assuming the book value of debt equals the market value.