The analyst is analyzing the financial statements of another Yettobe corporation (the state- ments are in million dollars). Its stock is currently traded at $50 and it has 20 million shares outstanding. The firms market value of debt is 120 millions. The shareholders require a return of 15% and before-tax cost of debt is 10%. Assume that the expected long-term growth rates in FCFF, FCFE, dividends, and residual income are 4%. Using the constant growth model to compute the following:

a. [6pts] What is firm value?

b. [2pts] What is the intrinsic equity value per share using FCFF?

c. [5pts] What is the intrinsic equity value per share using FCFE?

d. [3pts] What is the intrinsic equity value per share using DDM?

e. [3pts] What is the intrinsic equity value per share using residual income model?

f. [1pt] Based on our valuations, should the analyst give a buy/hold/sell recommendation for Yettobe stock?

2018 2019 17 18 20 23 3 41 Income statement 2019 Revenue 2,500 (-) Cost of goods sold 2,000 Gross profit 500 - SG&A 250 (-) Depreciation 50 EBIT 200 (-) Interest expense 20 EBT 180 (-) Taxes (at 20%) 36 Net Income 144 920 1,000 (50) (100) 870 900 914 941 Balance sheet Current assets Cash Accounts receivable Inventory Total current assets Fixed assets Gross property, plant, and equipment Accumulated depreciation Total fixed assets Total assets Current liabilities Accounts payable Short-term debt Total current liabilities Long-term debt Total liabilities Shareholders' equity Commonstock Retained earnings Total equity Total liabilities and owner's equity 14 50 64 222 286 12 60 72 227 299 548 548 80 628 94 642 914 941 2018 2019 17 18 20 23 3 41 Income statement 2019 Revenue 2,500 (-) Cost of goods sold 2,000 Gross profit 500 - SG&A 250 (-) Depreciation 50 EBIT 200 (-) Interest expense 20 EBT 180 (-) Taxes (at 20%) 36 Net Income 144 920 1,000 (50) (100) 870 900 914 941 Balance sheet Current assets Cash Accounts receivable Inventory Total current assets Fixed assets Gross property, plant, and equipment Accumulated depreciation Total fixed assets Total assets Current liabilities Accounts payable Short-term debt Total current liabilities Long-term debt Total liabilities Shareholders' equity Commonstock Retained earnings Total equity Total liabilities and owner's equity 14 50 64 222 286 12 60 72 227 299 548 548 80 628 94 642 914 941