Q1 Equity valuation (8 marks) Your company has been hired to provide an investment advice on XYZ Corporation. You estimate XYZ Corporation's FCFF in the year that just ended at $1.64 million. Depreciation was $400,000.00 and the average tax rate 35%. In addition, XYZ Corp paid $300,000.00 in interest payments and their net debt increased for $0.6 million. You estimate the free cash flows to equity will grow at 3% indefinitely. The return required by equity holders is 11%; there are 4 million shares outstanding a) Using Free cash flow approach, find the value of XYZ Corps share price. (4 marks) b) Given the calculated share price, and XYZ Corporation's current quoted price of $5.24 per share, what would be your investment advice for XYZ shares? Briefly explain. (1 mark) c) Analysts expect the share price of XYZ Corp next year to be $7.32. Given the risk free rate of 1%, the market expected return of 9%, and the share price calculated in a) what is the implied beta of XYZ Corp, assuming the CAPM holds? (2 marks) d) Given the beta you just estimated, does XYZ Corp belong to a defensive of cyclical industry? (1 mark)