6. Estimate firm G's equity value for a WACC of 8.7% assuming: Sales will grow at 8% in Year 1 Starting in Year 2, free cash flows (FCF) will grow at 4% in perpetuity Operating margin (EBIT/Sales) will remain as in Year O The corporate tax rate will remain 40% The ratio of Working Capital to Sales will remain as in Year 0 Annual capital expenditures remain equal to annual depreciation expenses You can proceed as follows: (a) forecast the FCF for Year 1; (b) estimate a terminal value (i.e. from Year 2 onwards); (c) estimate the enterprise value; (d) estimate the equity value. . 10 Balance sheets (in EUR millions) Assets Year -1 Year O Liabilities Year -1 Year o Cash 10 A/P 40 50 |A/R 50 60 Short-term deb 40 50 Inventories 40 50 Long-term debt 60 60 PPE 100 100 Equity 60 60 Total 200 220 Total 200 220 Income statement Year o Sales 400 COGS 260 SG&A 60 Depreciation 20 Interest expense 8 Taxes 20.8 Net income 31.2