As an example, consider Global Harmonic Control Systems (GHCS). Revenues, which are forecast to be $500 million in one year, are expected to grow at 10 percent per year for the two years after that, 8 percent per year for the next two years, and 6 percent per year after that. Expenses including depreciation are 60 percent of revenues. Net investment, including net working capital and capital spending less depreciation, is 10 percent of revenues. Because all costs are proportional to revenues, net cash flow (sometimes referred to as free cash flow) grows at the same rate as do revenues. GHCS is an all-equity firm with 12 million shares outstanding. A discount rate of 16 percent is appropriate for a firm of GHCSs risk. Assume tax rate as 40%.

1. Compute for the Price per share of GHCS
2. Using the P/E multiples, compute the price per share of GHCS (Assuming the P/E ratio of comparable firms in the GHCS industry is 7)