At the end of year 2004 the CKL Corporation had Operatubg free cash flow(OFCF) of $300,000 and 100,000 shares outstanding. Total debt is currently $10,000,000. The company projects the following annual growth rate in FCFE

Year Growth Rate 2005 25% 2006 20% 2007 15% 2008 10% 2009 12% 2010 14% 2011 16% 2012 18%

From year 2013 onward growth in FCFE 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 T-notes is 5% and the equity risk premium is 4%.The firm can raise debt at a pre-tax cost of 9%.The tax rate is 25%.

The proportion of equity is 55% and the proportion of debt is 45%.

1. Calculate the required rate of return on equity 2. Calculate the WACC.

3.Calculate the present value now (end of year 2004) of OFCF during the period of declining growth that is for years 2005 to 2008. 4. Calculate the present value now of OFCF during the period of declining growth (2009 - 2012) 5. Calculate the present value now of OFCF during the period of constant growth (2013 and onwards) 6. Calculate the intrinsic value of the Firm.

7.Calculate the intrinsic value of the stock now at the end of year 2004.