The following are extracts (re-organized) of financial statements of Nyayo Limited, a company in the manufacturing sector. The extracts are for the most recent period NYAYO LIMITED STATEMENT OF INCOME FOR THE PERIOD ENDED 31ST DECEMBER, 2019 Sh' Millions Sh' Millions Revenues 500.00 Gain on disposal 50.00 550.00 Less: Operating Expenses 100.00 450.00 Other Expenses: Depreciation 25.00 Amortization 5.00 Interest Expenses 20.00 50.00 Pre-Tax Earnings 400.00 Tax 120.00 Net Income 280.00 Appropriations Net Income 280.00 Dividends 224.00 Retained Earnings 56.00 NYAYO LIMITED STATEMENT OF FINANCIAL POSITION FOR THE PERIOD ENDED 31ST DECEMBER, 2019 Sh' Millions Sh' Millions Sh' Millions ASSETS Property, Plant and Equipment 500.00 CURRENT ASSETS Cash and Marketable Securities 30.00 Inventory 40.00 Accounts Receivables 60.00 130.00 Less: CURRENT LIABILITIES Accruals 10.00 Trade Payables 40.00 Short-Term Loans 20.00 Notes Payable 5.00 75.00 Working Capital 55.00 NET ASSETS 555.00 FINANCED BY: 10% Debt 100.00 Ordinary Share Capital 300.00 Retained Earnings 155.00 455.00 TOTAL FINANCING 555.00 Additional information (i) Revenues are expected to grow at an annual rate of 10% each for five years and 5% thereafter forever (ii) Current assets and current liabilities are expected to grow as revenues (iii)Property, plant and equipment expected to grow as revenues and to off-set each other in the steady state period (iv)Income statement items are expected to grow as revenues except for depreciation which has a direct proportional relationship with Property, plant and equipment (v) Retained earnings depends on the dividend policy of the company (vi)Nyayo Limited has settled on a debt-Equity ratio of 30%. At this level of debt-Equity ratio, pre-tax cost of debt is expected to be 10% (vii) Based on historical data the following estimates have been provide Risk free rate of return 5 Average Return on Market 12 Levered Beta of Nyayo Limited 1.5 Required: (a) Based on the information provided, project the income statement and financial position for year 2020. Based on the projections, compute for the year 2020; (i) Investment in working capital (ii) Investment in fixed capital (iii)Operating EBIT (iv)Non-Cash Charges (b) Compute free cash flow to Nyayo limited for years 2020 (c) Estimate (i) After tax cost of debt (ii) Cost of equity (iii)Weighted average cost of capital (d) Compute the terminal value (e) Using DCF approach, estimate the value of operations of the company