Nigel French, an analyst, is attempting to value the shares of Brendas Bakeries (BB), a largely successful, privately-held franchise of bakeries that specialize in hearth-baked breads and pastries.

French gathers the following data for BB for the most recent years (data in table in thousands, except EPS and tax rate):

2011 2010

Revenues $12,070 11,606

Operating Expenses $11,017. $10,750

Interest Expense $310. $340

Pre-Tax Income $743 $516

Taxes $297 $209

Net Income. $446. $307

Tax Rate 40.00% 40.07%

EPS. $4.46 $3.07

Other Data.

Depreciation Expense. $429 $392

Working capital balance. $1,378. $1,482

Capital expenditures $605. $665

Net new borrowing $50 $10

Shares outstanding 100 100

BB had outstanding debt of $3,475 (in thousands) at the end of 2011. French calculates a weighted average cost of capital for BB of 12.66%.

French forecasts annual FCFF for BB for the next two years of: 2012 FCFF = $420,000 2013 FCFF = $500,000

French forecasts that FCFF will grow 7% every year into perpetuity starting in 2014.

6. 6.) Based on Nigels forecasts of FCFF starting in 2012, what is BBs intrinsic firm value? (2 points)

7. 7.) Based on Nigels forecasts of FCFF starting in 2012, and assuming outstanding debt and shares outstanding from year-end 2011 is unchanged, what is the intrinsic value of BBs equity on a per share basis?