DDX, an electronic device maker, reported earnings per share of $2.02 in 2013, and paid no dividends. These earnings are expected to grow 14% a year for five years (2014 to 2018) and 7% a year after that. The firm reported depreciation of $2 million in 2014 and capital spending of $4.20 million and had 7 million shares outstanding. The working capital is expected to remain at 50% of revenues, which were $106 million in 2013, and are expected to grow 6% a year from 2014 to 2018 and 4% a year after that. The firm is expected to finance 10% of its capital

expenditures and working capital needs with debt. Dionex had a beta of 1.20 in 2013, and this beta is expected to drop to 1.10 after 2018. (The treasury bond rate is 7%.)

A. Estimate the expected free cash flow to equity from 2014 to 2018, assuming that capital expenditures and depreciation grow at the same rate as earnings.

B. Estimate the terminal price per share (at the end of 2018). Stable firms in this industry have capital expenditures which are 150% of depreciation and maintain working capital at 25% of revenues.

C. Estimate the value per share today, based upon the FCFE model.