Further assume the following:

• Galaxys FCF and earnings will grow at a constant rate of 4%
• Galaxys equity beta is 0.88
• US 3 month T-bill rate is 3.2%
• S&P 500 market return is 6.61%
• Currently Galaxy Interiors do not pay dividends.
• There are 200 million shares outstanding

FYI,

• Tax rate = taxes / taxable income
• Book value of equity = common stock + retained earnings
• B0 = book value per share
• Total debt = total current liabilities + total long-term debt
• NCS (Net Capital Spending) = change in Fixed assets + depreciation =Ending Fixed assets - Beginning fixed assets + depreciation
• Change in NWC (net working capital) = (CA CL ) _end (CA CL ) _beg
• FCF (Free cash flow) = EBIT * (1-tax rate) + Depreciation NCS change in NWC

What is Galaxy Interior's current equity value using the Residual Income Model (RIM) valuation?

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 Netfixed 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 Netfixed 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