Question 4 (15 marks) John, an analyst at HS Investment Management, is analyzing UG Ltd, a manufacturer of medical equipment. UG Ltd reported $150m in earnings before interest and taxes, capital expenditures of $45m, and depreciation of $30m in the most recent year. John has also uncovered the following additional items of interest: The firm had R&D expenses of $75m in the most recent year. John believes that a 3-year amortizable life is appropriate for this firm and the R&D expenses for the past three years have amounted to $30m (Year -3), $45m (Year -2) and $60m (Year -1) respectively. The firm also made 2 acquisitions during the year - a cash-based acquisition for $35m and a stock-based acquisition for $25m. The amortization of these acquisitions is already included in the current year's depreciation. The total working capital increased from $90m at the start of the year to $100m at the end of the year. However, the firm's cash balance increased from $40m at the start of the year to $60m at the end. (The cash is invested in T-bills). - The tax rate is 40% (a) Estimate the value of the research asset. (4 marks) (b) Estimate the amount of R&D amortization in the most recent year. (2 marks) (c) Estimate the adjusted after-tax operating income. (3 marks) (d) Estimate the free cash flow to the firm in the most recent year. (6 marks)