Exercise 4 (Exam spring 2015) An analyst has estimated the following pro-forma income statements and balance sheets for the years 2015-2019 for the company SILIPHONE Inc.: 2014 (actual) 2015 2016 2017 INCOME STATEMENT 2018 2019 Revenues Cost of goods sold Gross profit 19726 208 12789 15 637 048 20 909 775 22 164 361 13556504 14369 894 7353 271 7794 467 23 494 223 24903876 15 232 088 16 146013 B262 135 8757 863 Operating expenses: Fixed operating expenses Variable operating expenses Depreciation expense Netoperating income 1 000 000 3 169 343 3 200 214 197 491 1000000 3359 504 848 227 2 145 541 1000000 3561074 899 121 2334 273 1 000 000 3 774 738 953 068 2534 329 1000000 4001223 1010252 2746 389 Interest expense 442 862 438 721 429826 416 309 397 717 Earnings before taxes 1 24 629 1 706820 1904 447 2 118 021 2 348673 Taxes (40%) 609 852 682728 761 779 847 208 939469 Netincome 914 777 1024092 1142668 1270 813 1409 204 Dividends paid 100 000 100 000 100 000 100 000 100000 BALANCE SHEET Cash Accounts receivable Inventory Current assets Net property, plant and equipment Total assets 372 193 374 798 4056 899 4221 407 6 141 177 6450 468 10 570 268 11046 674 8002 139 8482267 18 572 407 19528 941 397 236 421 123 4474 692 4 743 173 6837 496 7 247 746 11 709 474 12 412042 8991 203 9530675 20 700 677 21 942 718 446 390 473 174 5027 754 5 329 429 7682611 8 143 568 13 156 765 13946 171 10 102 516 10 708 667 23 259 280 24 654 837 Accounts payable Short-term debt Current liabilities Long-term debt Total liabilities Deferred income taxes Owners' equity Total liabilities and owners' equity 4 400 050 4 094 118 8 494 168 2232 483 10 726 651 185 186 7 660 570 18 572 407 4497574 4004 419 8501993 2 263 018 10 765 011 198 583 8565 347 19528 941 4767 429 4 244 684 9012 113 1985 688 10997 801 213 438 9489 49 20 700 677 5053474 5356 683 5678 084 4499 365 4 769 327 5 055 487 9552 840 10126010 10 733 571 1627 898 1182 333 641 137 11 180738 11308 343 11 374708 229873 248018 268 007 10 532 107 11702919 33 012 123 21 942 718 23259 280 24 654 837 The analyst tells you that Cash is part of the firm's operating current assets. The firm's interest bearing debt consists of short-term debt and long-term debt. The analyst is using a weighted average cost of capital (WACC) of 10% and he believes the long-term growth rate in free cash flows will equal 5%. a) Estimate firm free cash flows for the years 2015-2019. b) Compute both the enterprise value and the equity value of SILIPHONE