1. Customers-Come-Last (CCL) is a local cable and internet service provider. Its free cash flow projections for the next two years are given below.

	Year 1	Year 2
Free Cash Flow	40,000	48,000

After Year 2, CCL will continue growing at a constant rate of 2% (per year). The firms tax rate is 30%.

You can assume the firm will maintain a debt-equity ratio of 1 (which means its and ratios equal 0.5).

The risk-free rate is 2%, and the market risk premium is 5%.

1. Compute CCLs cost of equity. You should assume here that CCLs equity beta equals 1.6.

(3 points)

2. Compute CCLs weighted average cost of capital. You should assume here that CCLs pre-tax cost of debt is 5%.

(4 points)

3. Compute the terminal value of CCLs FCF in year 2 (i.e., the value in year 2 of all free cash flows occurring after year 2).

(4 points)

4. Compute the total value of CCL (debt + equity).

(4 points)

5. Compute the value of CCLs equity. You can assume here CCL has 400,000 of debt.

(1 points)