Two-stage DCF You have been provided with the following information about company ABC Inc

After-tax operating income in 2020 was $30m, ABC facing a corporate tax rate of 20%

Capex was $18m and depreciation $6m

The non-cash working capital increased by $4m during the course of 2020

Assume that the after-tax operating income capital expenditures, depreciation and non-cash working capital all are expected to grow 6% a year for the next 3 years. After year 3 you expect the growth rate to drop to 2% and you anticipate the ROC to be stable at the same level that the firm maintained during the 3-year high growth period. The cost of capital in both the high growth phase and steady state is expected to be 7%.

1.(1.5 points)Estimate the FCFF for the next 3 years.

2. (0.5 point) Estimate the reinvestment rate.

3. (1.5 points)Estimate the terminal value.

4.(1.5 points)Estimate the value per share today if the firm has $20m cash balance,$70m in debt and 20m of shares outstanding.