1. Suppose that you are analyzing a stock to determine its intrinsic value. You went to the company's website to find an announcement about an expansion plan. The announcement states that the management has decided to borrow $25 million that costs 5% (the WACC) to fund the expansion. The management projects that the expansion will generate the following free cash flows for the next 3 years -$2 million, $8 million, and $15 million.After Year 3, free cash flow is projected to grow at a constant 3%.

A. What is the firm's market value (total value)?

B.If the firm has $20 million of debt, what is the market value (MV) of equity?

C.If the firm has 5 million shares of stock, what is the value (price) per share?

1. Sumukh is considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If the market interest rate is 10.7%, answer the following questions:

A. Without any calculations, is this a par, discount or premium bond? How did you know?

B. What is the maximum price she should be willing to pay for the bond?