3. On May 11, 2004, Yen Dollar, a portfolio manager at NewPoint, a mutual fund management firm, pored over analysts write-ups of Global Traders Corp. Global Traders is an expanding conglomerate, is a manufacturing company whose product lines consist of lighting fixtures, videodiscs, electronic timing devices, travel agencies, and self-storage space. Dollar was considering buying some shares for the fund she managed, the NewPoint Large-Cap Fund with an emphasis on value investing. Global Traders Corp's analyst has projected the following cash flows for the next four years (in million of dollars):

	2005	2006	2007	2008
Growth Rate		0.2	0.15	0.1
Net sales	$120	$144	$166	$182
Cost of goods sold	-$78	-$94	-$108	-$118
Selling/administrative expense	-$20	-$24	-$28	-$30
Depreciation	-$10	-$12	-$15	-$18
EBIT	$12	$14	$15	$16
Interest	-$5	-$6	-$8	-$10
EBT	$7	$8	$7	$6
Taxes (40%)	-$3	-$3	-$3	-$2
Net income	$4	$5	$4	$4

All cash flows above are assumed to occur at end-of-year and it is expected to grow at rate of 5% after 2008. Global Traders currently has a market value capital structure of 20 percent debt with interest rate 10% and a beta of 2. Depreciation-generated funds would be used to replace worn-out equipment, so they would not be available to 5 million Global Traders shareholders. The risk-free rate is 6 percent and the market risk premium is 8 percent.

VALUATION MODELS

In theory, there are several valuation models. These models are Discounted Cash Flow based on WACC, Cash Flow to Equity (CFE), Adjusted Present Value (APV), Market/Book Value, and P/E ratio, which could be used to estimate the value of a firm.

1.What is the value of the Global Traders based on WACC model?

2. What is the value to shareholders?