Below is a 4-year forecast of Peter Pan Ltd:

Year 2022 2023 2024 2025

Free Cash Flow (Millions) R-55 R75 R95 R115

Questions:

a) Estimate the fair market value of Peter Pan Ltd at the end of 2021. Assume that after 2025, EBIT will remain constant at R200 million, depreciation will equal capital expenditure in each year and there is no additional investment in working capital. WACC = 12% and the tax rate is 28%. (5 marks)

b) Estimate the fair market value PER SHARE of Peter Pan Ltd's equity at the end of 2021 if the company has 20 million shares outstanding and the market value of its interest-bearing liabilities is R200 million. (5 marks)

c) Estimate the fair market value of Peter Pan Ltd's equity per share at the end of 2021 under the following assumptions:

Free Cash Flows for the years 2022-2025 remain as stated earlier.

EBIT in year 2025 is R150 million and then grows with 5% each year into perpetuity.

To support the perpetual growth in EBIT, capital expenditures in 2026 exceed depreciation by R50 million , and this difference grows 5% per year into perpetuity.

Working Capital investments are R10 million in 2026, and this amount grows with 5% into perpetuity. (7 marks)