The Prentice Paint Company earned a net profit margin of 20 percent on revenues of $20 million this year. Fixed capital investment was $2 million, and depreciation was $3 million. percent per year for the next five years. After five years, the growth in sales, net income, depreciation and interest expense will decline to a stable 5 percent per year, and fixed capital investment and depreciation will offset each other. The tax rate is 40 percent, and Prentice has 1 million shares of common stock outstanding and long-term debt paying 12.5 percent interest trading at its par value of $32 million. Calculate the value of the firm and its equity using the FCFF model if the WACC is 17 percent during the high growth stage and 15 percent during the stable stage. Consider a rival to the Prentice Paint Company. Assume that Sioux Falls Dcor also has revenues of $20 million this year. However, we assume that its future performance will be tracked relative to sales as follows: Sales growth and net profit margin forecasts: - Fixed capital investment net of depreciation is projected to be 30 percent of the sales increase each year. - Working capital requirement are 7.0 percent of the projected dollar increase in sales in each year. - Debt will be finance 40 percent of the investments in net capital and working capital. - The company has 12 percent required rate of return on equity. - The firm has 1 million shares of common stock outstanding. The Prentice Paint Company earned a net profit margin of 20 percent on revenues of $20 million this year. Fixed capital investment was $2 million, and depreciation was $3 million. percent per year for the next five years. After five years, the growth in sales, net income, depreciation and interest expense will decline to a stable 5 percent per year, and fixed capital investment and depreciation will offset each other. The tax rate is 40 percent, and Prentice has 1 million shares of common stock outstanding and long-term debt paying 12.5 percent interest trading at its par value of $32 million. Calculate the value of the firm and its equity using the FCFF model if the WACC is 17 percent during the high growth stage and 15 percent during the stable stage. Consider a rival to the Prentice Paint Company. Assume that Sioux Falls Dcor also has revenues of $20 million this year. However, we assume that its future performance will be tracked relative to sales as follows: Sales growth and net profit margin forecasts: - Fixed capital investment net of depreciation is projected to be 30 percent of the sales increase each year. - Working capital requirement are 7.0 percent of the projected dollar increase in sales in each year. - Debt will be finance 40 percent of the investments in net capital and working capital. - The company has 12 percent required rate of return on equity. - The firm has 1 million shares of common stock outstanding