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Assume YogurtToday is expect to have earnings growth of 20% for the next 5 years and 5% thereafter. Its current earnings (net income) per

 

Assume YogurtToday is expect to have earnings growth of 20% for the next 5 years and 5% thereafter. Its current earnings (net income) per share is $2.50. Current capital spending is $2.00 and current depreciation is $1.00, per share. Increase in working capital in the current year is $0.25, per share. No change in debt. If we assume that capital spending, depreciation and change in working capital grow at the same rate as earnings. What would be the projected free cash flow to equity in year 6? Assuming a cost of debt at 8% and a cost of equity at 12%, what is the current equity value per share, based on this noncostant growth model? If we assume that depreciation and change in working capital grow at the same rate as earnings. And capital expenditure grows at the same rate as earnings for the next 5 years, and adjust in year 6 and thereafter to 150% of depreciation for the industry in which the firm operates. What would be the adjusted free cash flow to equity in year 6 now?

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