Q.no. E and F please.

Estimate SoftTec's equity value in dollars and per share at the end of 2013. SoftTec's management was wondering what the firm's equity value (dollar amount and on a per-share basis) would be if the cost of equity capital were only 20 percent. Recalculate the firm's value using this lower discount rato -125,0 125.0 - 1750 175.0 -30.0 -7.5 -400 -10.0 SoftTec Products Company The SoftTec Products Company is a successful, small, rapidly growing, closely held corporation. The equity owners are considering selling the firm to an outside buyer and want to estimate the value of the firm. Following is last year's in- come statement (2013) and projected income statements for the next four years (2014-2017). Sales are expected to grow at an annual 7 percent rate beginning in 2018 and continuing thereafter. ACTUAL PROJECTED IS THOUSANDS 2013 2014 2015 2016 2017 Net sales $150.0 $200.0 $250,0 $300.0 $3500 Cost of goods sold -75.0 -1000 -1500 Gross profit 75.0 100.0 1500 SG8A expenses -50.0 -600 -70.0 Depreciation -17.5 Earnings before interest and taxes 375 50.0 87.5 -3.5 -3.5 Earnings before taxes 340 59.0 71.5 84,0 Taxes (40% rate) - 13.6 -18.6 -23.6 728.6 -33.6 Net income $ 20.4 279 $ 354 $ 429 $ 504 Selected balance sheet accounts at the end of 2013 were as follows. Net fixed assets were $50,000. The sum of the required cash, accounts receivable, and inventories accounts was $50,000. Accounts payable and accruals totaled $25,000 Each of these balance sheet accounts was expected to grow with sales over time. No changes in interest-bearing debt were projected, and there were no plans to issue additional shares of common stock. There are currently 10,000 shares of common stock outstanding. Data have been gathered for a comparable publicly traded firm in the same industry that Soft-Tec operates in The cost of common equity for this other firm, Wakefield Products, was estimated to be 25 percent. Soft Tec has survived for a period of years. Management is not currently contemplating a major financial structure change and believes a single dis- count rate is appropriate for discounting all cash flows. -125 625 -3.5 -15.0 75.0 -3.5 Interest -3.5 165