Question 1 Sarah Brown, a buy-side analyst, was asked by her fund manager to provide an investment recommendation for BSS PLC's stock, a mining equipment manufacturer. BSS's shares are currently trading at 5.17. Sarah has assembled the following relevant information: The company has 1,852 million shares outstanding. The market value of its debt is 3.192 billion. The company is financed 25% with debt and this capital structure is expected to remain constant in the future. The Free Cash Flow to the Firm (FCFF) is currently 1.1559 billion. Sarah predicts that the FCFF will grow at the rate of 4% per year over the next three years. However, she is unsure about the pattern of FCFF after the three-year forecast horizon, and therefore decides to estimate BSS's terminal value (for the end of year three) by using two alternative approaches: Approach 1: Sarah estimates the terminal value by applying an the company's historical-average EV/Sales multiple of 2 to the company's forecasted sales for year three. She forecasts that sales will reach 2 billion at the end of year three. Approach 2: Sarah assumes that after the three-year forecast horizon the company's future FCFF will grow at a constant growth rate of 2% per year. BSS PLC's equity beta is 0.9, the equity risk premium is 5.5%, and the risk-free rate is 5.5%. The before-tax cost of debt is 7% and the tax rate is 40%. Required: Using the above information estimate BSS's intrinsic value per share under both approaches, and state and explain your investment recommendation(s). Please show your workings and provide explanations. (Total: 33.3%)