f there are 500 million shares outstanding, use the following information to find a fair value for Galaxy Interiors stock using the Free Cash Flow (FCF) model.

GALAXY INTERIORS INCOME STATEMENT ($ in millions)

NET SALES $ 35,000

COST OF GOODS SOLD $ 17,500

DEPRECIATION $ 2,500

EARNINGS BEFORE INTEREST AND TAXES (EBIT) $ 15,000

INTEREST EXPENSE $ 1,300

TAXABLE INCOME (EARNINGS BEFORE TAXES; EBT) $ 13,700

TAXES (0.30) $ 4,110

NET INCOME $ 9,590

Assume the following:

Free cash flow (FCF) will grow at 2.5%

Galaxy's equity beta is 1.50

Risk-free rate is 3% and market return is 13%

Currently, Galaxy is not paying any dividends

Book value of total debt is equal to the market value of debt

further note that, FCF (Free cash flow) = EBIT*(1-t) + depreciation - NCS - change in NWC

approx. $125

approx. $199

approx. $375

approx. $258

GALAXY INTERIORS BALANCE SHEET (PAST & CURRENT)
($ IN MILLIONS)
	PAST YR	CURRENT YR			PAST YR	CURRENT YR
CURRENT ASSETS	5500	6700		CURRENT LIABILITIES	2200	3000
(NET) FIXED ASSETS	25000	27000		LONG TERM DEBT	9300	9700
TOTAL ASSETS	30500	33700		TOTAL EQUITY	19000	21000
				TOTAL LIAB & EQUITY	30500	33700