HG Co. reported EBIT after taxes (EBIT - T) of $1,500 million in 2020. HG anticipates that growth in sales will be 7% in 2021, 4% in 2022, and will then be a constant 2.5% from that point onward. HG has a beta of 0.80 and is assuming a market rate of return of 10% and a risk-free rate of 4%. HG has a cost of debt of 5% and a tax rate of 25%. HG has a market value of debt of $2,000 million and a market value of equity of $8,000 million. HG believes that its ROC will remain at its current level (which equals 9%) for the next two years. After that, HG is assuming that it competitive advantage becomes zero in perpetuity. HG 100 million shares outstanding. Using the FCFF valuation method, what is an appropriate price for HGs stock? Show your work to get partial credit. You can use a spreadsheet if you want.

Formulas:

Growth in EBIT = (ROC) *(reinvestment rate)

reinvestment rate = g/ROC

FCFF = (EBIT(1 - T))*(1 - reinvestment rate)

WACC = (D/V)(K_d)(1-T) + (S/V)(K_SL)

k_sl = k_rf + (k_m - k_rf)b