Can I see working? a) Express sales, etc. in millions (so that $1 billion is expressed as $1,000 in the spreadsheet) and use 2 decimals, except use 4 decimals for the discount factor (which equals (1+WACC)N), to replicate my numbers exactly. However, normal rounding variation should not affect your score.

b) Appraisal date is 1/1/10, and Forecast Period is 2010 through 2014 inclusive. Net Income is forecast for 2010 at $60 million, and Net Income is projected to increase 20% each year in the Forecast Period. For the historical year 2009, Sales are $300 million.

c) Taxes are projected to be $40 million for 2010 and are projected to increase 20% each year in the Forecast Period. Interest Expense is projected to be $40 million in 2010 and is projected to increase 20% each year in the Forecast Period.

d) The Company's operating margin is projected to be constant at 40% in all years, and its tax rate is projected to be 40% in all years.

e) Sales are projected to grow at a constant nominal annual rate of 6% in the Perpetuity Period. Expected inflation rate is 4% in all years. The Company expects its nominal IRR to be 24% in the Perpetuity Period.

f) Net New Investment (NNI) is projected to be 10% of Sales in the Forecast Period. Accounts Receivable are $100mm, Inventory is $30mm, and Accounts Payable are $100mm, as of 12/31/2009.

g) Risk-free rate is 3.0%, risk premium is 7.0%, and small-cap risk premium is 1.20%, all nominal. Assume that equity beta is 3.00 when the optimal leverage ratio is 50%. Cost of Debt capital is 8.0% before accounting for tax benefits.

h) Cash as of 12/31/09 is zero. The Company's Long-Term Debt is $250 million; the Company also has an over-funded pension fund asset of $150 million; and the Company has a legal benefit (asset) with a present value of 101.76 million, all as of 12/31/09.

i) There are 800 million common shares outstanding. Also outstanding are 400 million management options providing the right to buy 400 million shares for an exercise price of $0.25 per-share.

ANSWER: DCF Per-Share Equity Value of Common Stock = 110 $1.00