A company is preparing a free cash flow forecast in order to calculate the value of equity.

The following information is available:

Sales: Current sales are $500m. Growth is expected to be 8% in year1, falling by 2% pa (e.g. to 6% in year 2) until sales level out inyear 5 where they are expected to remain constant in perpetuity.

The operating profit margin will be 10% for the first two years and 12% thereafter.

Depreciation in the current year will be $7m increasing by $1m paover the planning horizon before levelling off and replacement assetinvestment is assumed to equal depreciation. Incremental investment inassets is expected to be 8% of the increase in sales in year 1, 6% ofthe increase in sales in each of the following two years, and 4% of theincrease in year 4.

Tax will be charged at 30% pa.

The WACC is 15%.

The market value of short-term investments is $4m and the market value of debt is $48m.

Calculate the value of equity.