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The following table lists the Income statement and Balance sheet for First American Furniture Company Income Statement 2017 2018 Balance Sheet 2017 2018 Revenue $516

The following table lists the Income statement and Balance sheet for First American Furniture Company

Income Statement

2017

2018

Balance Sheet

2017

2018

Revenue

$516

$630

Current assets

$350

$420

Depreciation

30

35

Prop, plant, & Equip.

500

520

Other operating costs

400

480

Total assets

$850

$940

Income before taxes

86

115

Current liabilities

130

150

Taxes

30

40

Long-term debt

50

80

Net income

56

75

Total liabilities

$180

$230

Dividends

20

26

Shareholders equity

$490

$480

Earnings per share

$0.56

$0.95

Total L and equity

$850

$940

Dividend per share

$0.20

$0.26

Capital expenditures

45

50

# of Common shares

100

100

You are a financial analyst at RBC. Using the data above, you want to determine the value of First American Banks stock using the Free Cash Flow to Equity (FCFE) model. You believe that the companys FCFE will grow at 30% for three years and 10% thereafter. Capital expenditures, depreciation, working capital, and net debt are all expected to increase proportionately with FCFE. The required rate of return on equity is 15%.

Calculate the amount of FCFE per share for the year 2018. (I got .40) Calculate Projected 2021 terminal value based on constant growth of 10% (I got 1,933.36 but not sure if it's correct) Calculate the current value of a share of the stock based on the two-stage FCFE model. ( I got 20.87%)

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