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NEED HELP ASAP Latto company has 2 million shares outstanding. Below are the forecasted sales and expenditures for the next five years: Year 0 1

NEED HELP ASAP

Latto company has 2 million shares outstanding. Below are the forecasted sales and expenditures for the next five years:

Year 0 1 2 3 4 5

Sales and investments forecast ( millions):

Sales 120 130 136 147 158 168
Gross Fixed Assets 90 104 120 134 147 162
Depreciation 15.6 17 18.6 19.2 19.5

The Latto costs of goods sold, other costs, and the net working capital requirement are expected to be 70%, 15%, and 10% of sales over the years, respectively. Profits are subject to a tax rate of 30%.

Required:

  1. Estimate the free cash flows of Latto company for the next five years. (Rounding to two decimal places)

  2. Suppose that Latto only uses debt and equity as the capital, its target debt-to- value ratio is 1/3. The companys equity has a beta of 1.4. The annual risk-free rate is 3.3% and the annual market expected return is 12.3%. The cost of debt of the company is 6%. What is the weighted average cost of capital (WACC) of Latto company?

  3. Suppose Latto's free cash flows are expected to grow at a 5% rate beyond year 5, what is the value of ABC company?

  4. What is the value of equity and value per share of Latto company? (Rounding to two decimal places)

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