Beach Homes Inc. 2-year Financial Projection (S millions) 2017 2018 2019 Income statement Net sales 320 395 410 Cost of sales 120 130 145 Gross income 200 265 265 Depreciation 50 55 58 Interest expense 15 17 22 Operating expenses 25 24 28 Net income before tax 110 169 157 Provision for taxes 33 51 47 Net income after tax 77 118 110 Balance sheet Cash and securities 45 60 62 Accounts receivable 25 51 42 Inventory 47 74 50 Other current assets 18 15 17 Total current assets 135 200 171 Gross property and equipment 511 612 692 Accumulated depreciation 102 157 215 Net property and equipment 613 769 907 Goodwill 112 112 112 Total assets 860 1081 1190 Accounts payable 50 93 89 Short-term debt 62 75 79 Current portion long-term debt 12 20 22 Accrued expenses 18 20 21 Total current liabilities 142 208 211 Long-term debt 358 400 390 Deferred taxes 60 55 61 Shareholders' equity 300 418 528 Total liabilities and equity 860 1081 1190 7a. Estimate the present value of Beach Homes |nc.'s free cash flow for the years 2013 - 2019. Vacation Expert's WACC is 8 percent. Beach Homes' WACC is 10.5 percent, and the average of the two companies' WACCs, weighted by sales, is 9 percent. EBIT Tax rate EBIT(1tax rate} Depreciation Capital expenditures Working capital Change in working capital Free cash flow 7b. Estimate the share price Vacation Experts Inc. should pay for Beach Homes at the end of 2017 assuming in the years after 2019 the company's free cash flow grows 5 percent per year in perpetuity. In early 2018, Vacation Experts Inc. was interested in acquiring Beach Homes, Inc., a privately-held, real estate company. Beach Homes has 35 million shares currently outstanding. As a first step in deciding what price to bid for Beach Homes, Vacation Experts' finance department has prepared a two-year financial projection for the company assuming an acquisition. Use this projection and Beach Homes' 2017 actual financial figures to answer the questions below