GameStops most recent FCF value is ($34,484,000); this is a negative FCF value. Assume for purposes of this question that we have developed an expectation that for the next 3 fiscal years GameStop will generate FCF of $30,000,000; $40,000,000; and $75,000,000. After that we expect an average growth rate of 4% forever. Assume the WACC is 10%.

1. Show calculations for GameStops value of operations using the information above.
2. When you estimated your companys intrinsic stock price, I asked you not to worry about the difference between your estimate and the actual stock price. Now I would like you to make that comparison. If your calculated stock price is between 90% and 110% of the actual stock price, answer question 1 below. Otherwise answer question 2.

1. How should you interpret the similarity between your estimated stock price and the actual stock price?
2. There are at least 2 possible explanations for the difference between your estimated and actual stock prices: calculation error and mispricing in the market. Briefly explain how you might go about distinguishing between these two explanations and their very different implications.