Nyaya enterprise is a company owned by Mr Nomad. The company Is located in Nairobi$$s Industrial area. It manufactures and sells various products $.$ You have been tasked with the assignment of valuing the company using the discounted cash flow approach. The following information has been provided to enable you accomplish the assignment.

The following data for nyayo enterprise has been provided. The information is for the most recent period $($financial year ending December $2016.$

Revenues sh $30$

Erarnings before interest and tax sh $9$ million

Capital expenditure sh $4$m

Working capital investment sh $2$m

Depreciation sh $2$m

Ordinary Share capital sh $150$m

Borrowing sh $75$ m

Corporation tax for Nyayo enterprise is $30\%$ and the before tax cost of debt has been estimated at ten percent.

There are ten companies at the local stock exchange, and which are comparable to Nyayo enterprises limited$.$ The average beta of these companies is $1\mathrm{.}5$ based on market value of debt and Equity. On average based on comparable firms, market value of equity is twice the book value whereas market value of debt is equal to its book value. the average debt equity ratio for the industry consisting of the ten firms is $0\mathrm{.}2.$

The estimated return on market and treasury bonds is as presented below

Average return on NSE $20$ share index $12\%$

Return on treasury bond s is $7\%$It is expected that Earnings before interest and tax will

It is expected that earnings before interest and tax will grow at the rate of ten percent each year at the same rate as revenues. Revenues are expected to grow at an annual rate of ten percent each year for five years, and at an annual rate of three percent thereafter forever. Working capital investment is also expected to grow at the same rate as revenues.

Capital expenditure and depreciation are related. Both are expected to grow at an annual rate of fifteen percent for five years and offset each other at steady state.

Required

$($a$)$ Briefly discuss the discounted cash flow approach to valuation

$($b$)$ Compute the free cash flows to the firm for the following years $,2016,2017,2018,2019,2020,2021.$

$($c$)$ Compute the free cash flow for $2022.$

$($d$)$ Compute the cost of equity for the firm

$($e$)$ Compute after tax cost of debt for the firm

$($f$)$ Compute the weighted average cost of capital for the firm

$($g$)$ Compute enterprise value using the free cash flow to the firm