Question 4. Valuation - Discounted Cash Flow Model The valuation assumptions about Alpha Cheese Inc. are provided as follows, where the assumptions for 2018 as extracted from published financial statements and the assumptions for 2019-2021 are forecasts 2018 2019F 2020F 2021F Net Profit 25,000 27,000 29,000 31,000 Working Capital 90,000 95,000 97,000 95,000 Net long-term operating assets 350,000 375,000 400,000 425,000 Net Debt 90,000 92,000 94,000 96,000 (1) Forecasted free cash flow (FCF) for years 2019 to 2021 (2) Suppose the cost of equity is 8%. Derive the present value of FCF for years 2019 to 2021 (3) Assuming we assume the economy will grow at a constant rate of 3% beyond 2021. The current market valuation of Alpha Cheese Inc. in 2018 is $270,000. Base on the results of valuation using DCF model, should we recommend buy or sell Alpha Cheese Inc.? Question 4. Valuation - Discounted Cash Flow Model The valuation assumptions about Alpha Cheese Inc. are provided as follows, where the assumptions for 2018 as extracted from published financial statements and the assumptions for 2019-2021 are forecasts 2018 2019F 2020F 2021F Net Profit 25,000 27,000 29,000 31,000 Working Capital 90,000 95,000 97,000 95,000 Net long-term operating assets 350,000 375,000 400,000 425,000 Net Debt 90,000 92,000 94,000 96,000 (1) Forecasted free cash flow (FCF) for years 2019 to 2021 (2) Suppose the cost of equity is 8%. Derive the present value of FCF for years 2019 to 2021 (3) Assuming we assume the economy will grow at a constant rate of 3% beyond 2021. The current market valuation of Alpha Cheese Inc. in 2018 is $270,000. Base on the results of valuation using DCF model, should we recommend buy or sell Alpha Cheese Inc