Consider the following end of year financial information that a financial analyst has forecasted for White plc. for the next five years from 2021 to 2025.

 

i. Assuming a cost of capital of 10% per year, estimate the share price? At the end of 2020 using free cash flow to equity (FCFE) method?

ii. Are White plc's shares over- or under-valued if they are currently trading at £12.00 per share? Would you recommend a buy, sell, or hold, and why?

per share Operating cash flows Capital expenditure Debt increase/(decrease) Book value Years 2022 2023 2024 2.25 1.50 1.125 1.50 1.50 (1.50) (0.75) 1.50 1.875 0.75 13.50 14.175 14.325 13.725 12.60 10.95 2020 2021 3.00 - 2025 0.75