Simtek projects year-end EBIT of $800M which is expected to grow at 5% annually, and capital expenditures will equal depreciation. Simtek has $4,590M of 6% perpetual debt trading at face value and no excess cash. The tax rate is 25%, and Simtek debt will grow at 5% annually with the rest of the firm. Simtek has an unlevered cost of capital RA equal to 10.10%.

Find the year-end free cash flow to the firm (FCF).

Use the adjusted present value (APV) method to find the value of equity.

Find the free cash flow to equity (FCFE).

Find the cost of equity RE.

Use the free cash flow to equity method to find the value of equity.

Find the weighted average cost of capital RWACC.

Use the free cash flow to the firm method to find the value of equity.