Use the following to answer the next four (5) questions

American Wheels is considering purchasing Canadian Tyre Inc. American Wheels, a high-end auto parts retailer, has been provided with the following information for Canadian Tyre:

Earnings before interest and tax (EBIT): $6,500,000

Interest Payments: $500,000

Depreciation and Amortization Expense: $350,000

Decrease in Net Working Capital: $200,000

Capital Expenditures: $150,000

Corporate Tax Rate: 35%

Number of Shares Outstanding: 2,000,000

Beta:1.1250

The Market Risk Premium: 6%

The Risk-Free Rate: 4%

Assuming the Free Cash Flows to the equityholders (FCFE) will be stable for the foreseeable future and using the above information and forecasts, determine the following:

Q1.

What are the Free Cash Flows to the firm (FCFF)?

$3,900,000

$4,225,000

$4,300,000

$4,625,000

Q2.

What are the Free Cash Flows to the EquityHolders?

$3,900,000

$4,225,000

$4,300,000

$4,625,000

Q3.

What is the Cost of equity using the Capital Asset Pricing Model (CAPM)?

6.25%

10.35%

10.75%

12.50%

Q4.

What is the Total Value of Equity?

$37,681,159

$40,000,000

$62,400,000

$68,800,000

Q5.

What is the Price per Share?

$18.84

$20.00

$31.20

$34.40