1. Fundamental valuation. Financial analyst is evaluating XS Company by using the FCFF valuation approach. The analyst has collected the following information on its expected revenues and after-tax operating income (in $ millions), each year for the next 5 years:

The company currently has 250 million shares trading at $10/share (book value of equity=$1 000 million). The company also had $800 million in debt outstanding (both book and market value) and $500 million in non-core financial investments and cash. The cost of capital for the firm is expected to be 10% for the next 5 years and drop to 8% thereafter.

Questions:

1. Assuming that the company is going to reinvest 40% of its after-tax operating income in next 5 years, estimate the free cash flow to the firm each year for the next five years

NO additional information is given, we have no info about revenue and after tax operating cash flow, this is a corporate finance task.