Problem 2 Emma Li successfully finished her MBA and now works as the CFO of the Freelancer.com, a major player in the world of online IT outsourcing, with more than 2.9 million projects posted on its site. The projects, initially focused on website design, graphic design, copywriting, and SEO now also include astrophysics, biotechnology, industrial design, and aerospace engineering Freelancer.com is preparing an acuisition and Emma has been required to independently value the shares of the target fim. Xlance. The CEO, in negotiations currently with the investment Bank and the target firm, prefers to have this in-house independent valuation as an initial anchor. The target. Xlance, is a startup that grew to have more than alulf million ers, positioning its site in the top ten largest freelance marketplace in the world. The acquisition would allow Freelancer.com to expand into new markets and increase its global footprint. The investment bank analysts expect Xlance to increase its sales by 6 percent in the long run. Emma has estimated Xiance sales at about $6.2 million in 2021. Xlance's EBIT is 15% of sales, changes in net working capital requirements are 10% of any change in sales, and capital expenditures equal depreciation expense Xiance has $1.2 million in cash, $1.2 million in debt, and 100,000 shares outstanding. Similar firms have a tax rate of 21% and a cost of capital (discount rate) of 15%. From Bloomberg, Emma also found out that comparable firms in the industry have on average a P/E ratio of 11 and a P/S ratio of 12. What concerus Emma is that financial analysts in the industry do not converge in their expectations of Xiance's growth. A well reputed Toronto-base altexpects the firm to grow at 10 percent each year for the next 5 years, then continue at percent in the long mun Another reputed technology analyst based in Stockholm disagrees with the growth prospects in the short term and estimates that a slow economy will cut the business expertise for technology altogether. Thus she anticipates Xlance will decrease in sales by 5 percent in the next three years, then by 1 and 2 percent in the next two you Only then does she stimate that the firm will start increasing its sules by 3 percent each year in the long run. 1. Help Emma estimate Xlane's future free cash flow to the firm for the next year using the sumptions of growth indicated by the investment Bank How much should share of Xlance be worth today? (1 point) Hint In this case you can vise the firm with the free and flow (DCF) approach. This appronch in implemented almost identically to the dividend discount model (DDN), except that instead of