Further assume the following:

• FCF and earnings will grow at a constant rate of 4%
• market return is 6.61%
• equity beta is 0.88
• There are 200 million shares outstanding
• month T-bill rate is 3.2%
• Currently Galaxy Interiors do not pay dividends.

1. Current equity value is using FCF?

2. Current equity value is using RIM

GALAXY INTERIORS 2015 Income Statement ($ in millions) Net sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable Income Less: Taxes Net income $ 21,415 16,408 1,611 $ 3,396 1,282 $2,114 740 $1,374 Cash Accounts receivable Inventory Total Net fixed assets 2014 $ 668 1,611 3,848 $ 6,127 17,489 GALAXY INTERIORS 2014 and 2015 Balance Sheets ($ in millions) 2015 $ 297 Accounts payable 1,527 Notes payable 2,947 Total $ 4,771 Long-term debt 17,107 Common stock Retaining earnings $ 21,878 Total liab. & equity 2014 $1,694 2,500 $ 4,194 9,800 7,500 2,122 $ 23,616 2015 $1,532 0 $1,532 10,650 7,000 2,696 $ 21,878 Total assets $ 23,616 GALAXY INTERIORS 2015 Income Statement ($ in millions) Net sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable Income Less: Taxes Net income $ 21,415 16,408 1,611 $ 3,396 1,282 $2,114 740 $1,374 Cash Accounts receivable Inventory Total Net fixed assets 2014 $ 668 1,611 3,848 $ 6,127 17,489 GALAXY INTERIORS 2014 and 2015 Balance Sheets ($ in millions) 2015 $ 297 Accounts payable 1,527 Notes payable 2,947 Total $ 4,771 Long-term debt 17,107 Common stock Retaining earnings $ 21,878 Total liab. & equity 2014 $1,694 2,500 $ 4,194 9,800 7,500 2,122 $ 23,616 2015 $1,532 0 $1,532 10,650 7,000 2,696 $ 21,878 Total assets $ 23,616