Question 1 (22 points) Below you find the 2021 balance sheet of Abana Inc. and forecasts for the 2022 and 2023 balance sheets and income statements. (All values are book values.) Aband's cost of equity capital is 12%, its cost of debt is 8%, the tax rate is 30%, and the target leverage (D/(D+E)) is constant at 20% in the long run (i.e., after 2023). Assume that all cash flows are received at the end of each year. Current and forecast balance sheets of Abana (in million ) 2021 2022E 2023E Current Assets 175 190 220 Fixed Assets Fixed assets at cost 1.325 1.600 1.850 Accumulated Depreciation 420 590 780 Net fixed assets 905 1.010 1.070 Total assets 1.080 1.200 1.290 Current liabilities 97 100 100 Debt 325 325 325 Shareholder's Equity Stock 400 400 400 Accumulated retained earnings 258 375 465 Total equity and liabilities 1.080 1.200 1.290 Forecast income statements of Abana (in million ) 2022E 2023E Sales 2.000 2.400 COGS 1.200 1.440 Depreciation 170 190 EBIT 630 770 Interest 20 20 Taxes 183 225 Net Earnings (or Earkings after taxes) 427 525 Dividends 310 435 Add. Retained Earnings 117 90 a) Calculate the expected unlevered free cash flows of Abana for the years 2022 and 2023 (8 points) b) Assume that the 2023 unlevered free cash flow continues to grow with a nominal rate of 4% and inflation is expected to be 2% for all years to come. What is the firm value of Abana on January 1st, 2022? (6 points) APV or WACC? If you are not able to calculate the free cash flows in a), you can use 300 and 450 for 2022 and 2023, respectively. Note that these may not be the correct values! c) What percentage of your estimate in b) depends on your forecast for the time after 2023? What could you do to make your estimate less dependent on the distant future? (2 points) d) What is the value of Abana's equity on January 1st, 2024? First, compute the market value of equity for Abana on January 1st, 2024 based on DCF-WACC, i.e., your previous calculations. Then, calculate the flows to equity from January 2024 on to estimate Abana's equity value on January 1st, 2024. Do the two procedures result in the same or in different values in the given case? Why? FTE: Aitnet debt Remember that by January 1st, 2024, Abana will have reached its target leverage level. (6 points)