Weeramantry's next task in researching Microsoft stock is to estimate the required return on equity (which is also a required return on total capital because Microsoft has no long-term debt). Weeramantry uses an equally weighted average for the CAPM and FFM estimates unless one method appears superior as judged by more than five points in the adjusted R2; In this case, only the estimate with superior explanatory power is used. Illustration 7 shows the cost of equity information for Microsoft Corporation. All beta estimates in Figure 7 are significant at the 5 percent level

Uwe Henschel evaluates TechnoSchaft on the basis of the following information: Year 0 sales per share = 25. Sales growth rate = 20 percent annually for three years and 6 percent annually thereafter. Net profit margin = 10 percent forever. .Net investment in fixed capital (after deducting depreciation) = 50% of the increase in sales. Annual increase in working capital = 20% of sales increase. Debt financing = 40 percent of net investment in capital equipment and working capital. TechnoSchaft beta 1.20; Risk-free rate of return = 7 percent; Equity risk premium = 4.5 percent. Please show FCFE future forecast and calculate TechnoSchaft value based on