Consider HES Company?s financial statements given below. Assume the Company?s beta is estimated to be 1.5, risk free rate 2%, and market risk premium 10%. Furthermore, assume the company has a long-term growth rate for 2% after the fifth year and net income and comprehensive income will be identical.

What is the company's value using the following methods, for each method and part, provide your analysis and discussion. a) Residual Income (40 pts) b) Value to Book (40 pts) c) Free Cash Flow to Equity (FCFE) (40 pts) d) Free Cash Flow to Company (FCFC, Debt and Equity) (40 pts) c) If Owners decide to issue 1,000,000 common shares (assume no floatation cost), how much would be the value for each share? Which valuation method would you prefer, why? (40 pts) d) Analyze and explain which one of the above valuation methods provides a better and more realistic valuation, for an investor, an acquiring company, and a lender? (50 pts)

Revenues Cost of Sales Gross Profit Accounting Advertising & Promotion Bank Charges Compensation & Benefits Consulting Fees Insurance Lease - Facilities Legal & Professional Licenses & Fees Maintenance Misc. Office Supplies Security Telephone Utilities Website Total Operating Expenses EBIDTA Depreciation Operating Profit Interest Expense Earnings Before Taxes Income Taxes Net Income Year 1 $ 1,976,000.00 $ 1,213,659.00 $ 762,341.00 $ 6,000.00 $ 15,000.00 $ 41,496.00 $ 246,643.00 $ 2,400.00 $ 1,000.00 $ 336,000.00 $ 500.00 $ 500.00 $ 600.00 $ 1,800.00 $ 2,700.00 $ 720.00 $ 1,800.00 $ 4,200.00 $ 1,800.00 $ 663,159.00 $ 99,182.00 $ 4,916.00 $ 94,266.00 $ 43,199.00 $ 51,067.00 $ 17,873.00 $ 33,194.00 Year 2 $ 2,074,800.00 $ 1,274,342.00 $ 800,458.00 $ 6,300.00 $ 12,360.00 $ 43,571.00 $ 254,042.00 $ $ 1,050.00 $ 336,000.00 $ 500.00 $ 510.00 $ 612.00 $ 1,836.00 $ 2,754.00 $ 742.00 $ 1,836.00 $ 4,410.00 $ 1,800.00 $ 668,323.00 $ 132,135.00 $ 4,916.00 $ 127,219.00 $ 40,274.00 $ 86,945.00 $ 30,431.00 $ 56,514.00 Year 3 $ 2,178,540.00 $ 1,338,059.00 $ 840,481.00 $ 6,615.00 $ 12,731.00 $ 45,749.00 $ 261,663.00 $ $ 1,103.00 $ 336,000.00 $ 500.00 $ 520.00 $ 624.00 $ 1,873.00 $ 2,809.00 $ 764.00 $ 1,873.00 $ 4,631.00 $ 1,800.00 $ 679,255.00 $ 161,226.00 $ 4,916.00 $ 156,310.00 $ 37,059.00 $ 119,251.00 $ 41,738.00 $ 775,133.00 Year 4 $ 2,287,467.00 $ 1,404,962.00 $ 882,505.00 $ 6,946.00 $ 13,113.00 $ 48,037.00 $ 269,513.00 $ $ 1,158.00 $ 336,000.00 $ 500.00 $ 531.00 $ 637.00 $ 1,910.00 $ 2,865.00 $ 787.00 $ 1,910.00 $ 4,862.00 $ 1,800.00 $ 690,569.00 $ 191,936.00 $ 4,916.00 $ 187,020.00 $ 33,524.00 $ 153,496.00 $ 53,724.00 $ 99,772.00 Year 5 $ 2,401,840.00 $ 14,775,210.00 $ 926,630.00 $ 7,293.00 $ 13,506.00 $ 50,439.00 $ 277,598.00 $ $ 1,216.00 $ 336,000.00 $ 500.00 $ 541.00 $ 649.00 $ 1,948.00 $ 2,923.00 $ 810.00 $ 1,948.00 $ 5,105.00 $ 1,800.00 $ 702,276.00 $ 224,354.00 $ 4,916.00 $ 219,438.00 $ 29,639.00 $ 189,799.00 $ 66,429.00 $ 123,370.00 Cash Inventory Prepaid Leases Total Current Assets Fixed Assets Less - Depreciation Net Fixed Assets Total Assets Accounts Payable Long Term Debt Total Liabilities Owner's Equity Paid-In Capital Retained Earnings Total Liabilities & Equity Begin $ 33,150.00 $ 425,000.00 $ 28,000.00 $ 486,150.00 $ 33,850.00 $ $ 33,850.00 $ 520,000.00 $ $ 468,000.00 $ 468,000.00 Year 1 $ 110,697.00 $ 425,000.00 $ 28,000.00 $ 563,697.00 $ 33,850.00 $ 4,916.00 $ 28,934.00 $ 592,631.00 $ 68,908.00 $ 438,529.00 $ 507,437.00 Year 2 $ 210,697.00 $ 424,781.00 $ 28,000.00 $ 663,478.00 $ 33,850.00 $ 9,832.00 $ 24,018.00 $ 687,496.00 $ 139,654.00 $ 406,133.00 $ 545,787.00 Year 3 $ 243,259.00 $ 446,020.00 $ 28,000.00 $ 717,279.00 $ 33,850.00 $ 14,747.00 $ 19,103.00 $ 736,382.00 $ 146,637.00 $ 370,522.00 $ 517,159.00 Year 4 $ 293,834.00 $ 468,321.00 $ 28,000.00 $ 790,155.00 $ 33,850.00 $ 19,664.00 $ 14,186.00 $ 804,341.00 $ 153,968.00 $ 331,377.00 $ 485,345.00 $ 52,000.00 $ 52,000.00 $ 52,000.00 $ 52,000.00 $ 52,000.00 $ - $ 33,194.00 $ 89,709.00 $ 167,223.00 $ 266,996.00 $ 520,000.00 $ 592,631.00 $ 687,496.00 $ 736,382.00 $ 804,341.00 Year 5 $ 363,370.00 $ 491,737.00 $ 28,000.00 $ 883,107.00 $ 33,850.00 $ 24,579.00 $ 9,271.00 $ 892,378.00 $ 161,667.00 $ 288,346.00 $ 450,013.00 $ 52,000.00 $ 390,365.00 $ 892,378.00