The income statement and reorganized balance sheet for Swanton Plc. are given below. Income Statement (in millions)	Reorganized balance sheet (in millions)
Today	Year 1	Today	Year 1
Revenues	1500.0	1560.0	Operating working capital	101.5	105.56
Operating costs	(1275.0)	(1326.0)	Property and equipment	530.0	551.20
Depreciation	(75.0)	(78.0)	Invested capital	631.5	656.76
Operating profits	150.0	156.0
Debt	375.0	390.00
Interest expenses	(25.0)	(16.875)	Shareholders' equity	256.5	266.76
Earnings before taxes	125.0	139.125	Invested capital	631.5	656.76
Taxes	(27.5)	(30.608)
Net Income	97.5	108.518

Assume the cost of equity is 9% and cost of debt before tax is 4.5%. The operating tax rate (also marginal tax rate) is 22 percent. Assume the market value of debt equals book value of debt. In addition, revenues, the free cash flow to firm (FCFF), free cash flow to equity holders (FCFE) and the economic profit (RIF) all are expected to grow at 4 percent from year 1.

(a). Determine the following values for year 1: net operating profit after tax (NOPLAT), the free cash flow to firm (FCFF), and free cash flow to equity holders (FCFE).

(b). Assume Swanton Plc. currently has 65 million shares outstanding. Compute Swanton’s intrinsic value of equity and value per share today by using the free cash flow to equity holders (FCFE) model.

(c). Calculate the weighted average cost of capital and the enterprise economic profit (RIF) today.

(d). Estimate Swanton’s enterprise value using the DCF model and the economic profit model, and compare your valuation.

(e). Calculate the intrinsic equity value for Swanton Plc using the indirect approach. Compare the intrinsic value per share with value per share in (b) above.

(f). Explain the difference between dividends in the dividend discount model (DDM) and FCFE. Comment on the following statement: the DDM model cannot be used to value firms with no cash dividend payment history.