Prepare a Discounted Cash Flow (DCF) model for the following business and compute the items asked below.

Business description:

Current year EBIT is $250m and is expected to grow at 5% per annum.

Forecast period: 5 years in the future.

The company is claiming constant depreciation at $20m on its fixed assets and is expected to do so in the forecast period as well.

The company is not aiming at any new capital expenditure in the forecast period.

Present differential working capital for the business is $30m. $10m of additional working capital is expected to be required over and above this $30m each year of the forecast period. Thus, in the first year of the forecast period, the additional working capital shall be $40m, which shall increase to $50m in the second year and so on.

Assume cost of capital: 12%, terminal growth rate: 4%, tax rate: 25%.

The company has $500m of debt and $120m of cash on its balance sheet.

The company has 350m of shares outstanding in the stock market and its current market price is $8.

Using the information mentioned above, compute the following (parts i to iv):

i. Operating cash flows for the business for the five years of the forecast period.

ii. Terminal cash flow for the business in the fifth year.

iii. Enterprise value of the business using the DCF model.

iv. Equity value of the business and the implied share price using the DCF model.