1. Fine Taylors finished last year with $200,000 in revenue. The company believes that they will be able to grow revenue by 10% for the following four years. Taylors has variables costs of 25% of revenue and fixed costs of $50,000. Depreciation is estimated to be at 10% of revenue, while net working capital would be at 8% of revenue. Capital investment for the next four years would be $10,000 annually. The company has debt of 800,000 that pays 4% interest on an annual basis. There is no expectation that any new debt will be issued nor there are going to be any repayments over the next four years. The firm has 500,000 outstanding shares of common stock with a beta of 0.85, the risk free is 3.5% and the expected return on the market is 9%. Beyond the fourth year, management believes that the company is going to grow at a constant rate of 1.5%. The effective tax rate is 21%.
   1. What is Fine Taylors cost of equity?
   2. What is the pro forma financial statement for the next four years?
   3. What is the change in net working capital for years 1 through 4?
   4. What is the companys free cash flow to the equity for years 1 through 4?
   5. What is the stock price for Fine Taylors common stock?

Re bo Year 1 Revenue Variable Cost Fixed Cost Depreciation Total Costs EBIT Interest Net Income Net Working Capital Year 0 ANWC Free Cash Flow Year 1 Valuation Year 1 Total FCF PV Company Value Outstanding Shares Price TV=