At the end of the year 2004 the BRK Corporation had free cash flow to equity (FCFE) of $250,000 and shares outstanding of 200,000. The company projects the following annual growth rates in FCFE Year Growth Rate 2005 10% 2006 15% 2007 20 % 2008 25% 2009 20% 2010 15% 2011 10% 2012 796 From year 2013 onward growth in FCFE is expected to remain constant at 5% per year. The stock has a beta of 1.3 and the current market price is $55. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4% Calculate the required rate of return on equity 1. 11 11 iv Calculate the present value now (Year 2004) of FCFE during the period of increasing growth (that is for years 2005 to 2008). Calculate the present value now (Year 2009 to 2012). (that is for years V At the end of the year 2004 the CKL Corporation had operating free cash flow (OFCF) of $300,000 and shares outstanding of 100,000 Total debt is currently $10,000,000 The company projects the following annual growth rates in OFCF Year Growth Rate vi. Calculate the present value now (Year (that is for years 2013 onwards). Calculate the intrinsic value of the stock now (Year 2004). 2005 25% 2006 20% 2004) of FCFE during the period of declining growth 2004) of FCFE during the period of constant growth 2007 15% 2008 10% 2009 12% 2010 14% 2011 16% 2012 18% From year 2013 onward growth in OFCF is expected to remain constant at 5% per year. The stock has a beta of 1.1 and the current market price is $80. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%. The firm can raise debt at a pre-tax cost of 9% (YTM). The tax rate is 25%. The proportion of equity is 55% and the proportion of debt is 45%. i Calculate the required rate of return on equity #1. Calculate the weighted 111. (Ke) average cost of capital (WACC). Calculate the present value now (Year 2004) of OFCF during the period of declining growth (that is for years 2005 to 2008). Calculate the present value now (Year 2004) of OFCF during the period of declining growth (that is for years 2009 to 2012). during the period of constant growth Calculate the present value now (Year 2004) of OFCF (that is for years 2013 onwards). Calculate the total intrinsic value of the firm