7 (a) The Philadelphia Pretzel Company (PPC) earned $1.00 per share last year and paid out a dividend of $0.20 per share. PPC expects earnings to grow at 25% for the next 5 years, over which they plan to maintain a payout ratio of 20%. After the 5 years, the growth will decline to a stable 5% per year, and the payout ratio will increase to 40%. What is the per share value of the company's stocks if the shareholders require a return of 18% on their investment during the high growth stage and a return of 12% during the stable stage? (b) For the following forecasted data of firm X, calculate the intrinsic value of equity and value of the firm using free cash flow to equity and free cash flow to firm: Number of outstanding shares outstanding 400000, beta 1.5, risk free rate 5%, expected market return 9% and constant growth rate of the company 5% after five years, Market value of debt 4500000 and WACC 10%, tax rate 30%. Yearl Year 2 Year3 Year4 Net Income 800,000 850,000 900,000 940,000 Depreciation 200,000 250,000 225,000 275,000 Capital Expenditure 300,000 100,000 400,000 300,000 Increase in working -50,000 100,000 -75,000 25,000 capital New Debt 150,000 75,000 180,000 150,000 Debt paid 100,000 100,000 150,000 125,000 Interest 300,000 -320,000 330,000 350,000