In Case 10.1, we projected nancial statements for Starbucks for Years 1 through 5. In this portion of the Starbucks Integrative Case, we use the projected nancial statements from Case 10.1 and apply the techniques learned in this chapter to compute Starbucks required rate of return on equity and share value based on the free cash ows valuation models. We also compare our value estimate to Starbucks share price at the time of the case development to provide an investment recommendation. The market equity beta for Starbucks at the end of 2012 is 0.75. Assume that the risk-free interest rate is 3.0% and the market risk premium is 6.0%. Starbucks has 749.3 million shares outstanding at the end of 2012. At the start of Year 1, Starbucks share price was $50.15

c. Project the continuing free cash ow for common equity shareholders in Year 6. Assume that the steady-state, long-run growth rate will be 3% in Year 6 and beyond. Project that the Year 5 income statement and balance sheet amounts will grow by 3% in Year 6; then derive the projected statement of cash ows for Year 6. Derive the projected free cash ow for common equity shareholders in Year 6 from the projected statement of cash ows for Year 6. = 5 points

Forecasts for net cash flows from operations: Year 1- 2603, Year 2- 2559, Year 3- 3181, Year 4- 3381, Year 5- 3901, Year 6- 3248

Forecasts for net cash flows from investing activities: Year 1- (1373), Year 2- (1527), Year 3- (1697), Year 4- (1873), Year 5- (2071), Year 6- (530)

Forecasts for net cash flows fro financing activiities: Year 1- (1189), Year 2- (884), Year 3- (1324), YEar 4- (1340, YEar 5- (1645), YEar 6- (2662)