What is the company's value using the following methods: a) Residual Income b) Free Cash Flow c) If Owners decide to issue 1,000,000 common shares, how much would be the value for each share? d) Analyze and explain which one of the above valuation methods provides a better and more realistic valuation.

you are required to perform valuation for HES Company as given below. Show detail work and discuss any assumptions you make. Consider HES Company's financial statements given below. Assume the Company's beta is estimated to be 1.5, risk free rate 2%, and market risk premium 10%. Furthermore, assume the company has a long-term growth rate for 2% after the fifth year and net income and comprehensive income will be identical. What is the company's value using the following methods: a) Residual Income b) Free Cash Flow c) If Owners decide to issue 1,000,000 common shares, how much would be the value for each share? d) Analyze and explain which one of the above valuation methods provides a better and more realistic valuation. Revenues Cost of Sales Gross Profit Accounting Advertising & Promotion Bank Charges Compensation & Benefits Consulting Fees Insurance Lease - Facilities Legal & Professional Licenses & Fees Maintenance Miscellaneous Office supplies Security Telephone Utilities Website Income Statement Year 1 Year 2 Year 3 Year 4 Year 5 $1,976,000 $2,074,800 $2,178,540 $2,287,467 $2,401,840 1,213,659 1,274,342 1,338,059 1,404,962 1,475,210 $762,341 $800,458 $840,481 $882,505 $926,630 6,000 6,300 6,615 6,946 7,293 15,000 12,360 12,731 13,113 13,506 41,496 43,571 45,749 48,037 50,439 246,643 254,042 261,663 269,513 277,598 2,400 1,000 336,000 500 500 600 1,800 2,700 720 1,800 4,200 1,800 0 1,050 336,000 500 510 612 1,836 2,754 742 1,836 4,410 1,800 0 1,103 336,000 500 520 624 1,873 2,809 764 1,873 4,631 1,800 0 1,158 336,000 500 531 637 1,910 2,865 787 1,910 4,862 1,800 0 1,216 336,000 500 541 649 1,948 2,923 810 1,948 5,105 1,800 Total Operating Exp. 663,159 668,323 679,255 690,569 702,276 EBIDTA Depreciation Operating Profit Interest Expense $99,182 4,916 $94,266 43,199 $132,135 4,916 $127,219 40,274 $161,226 4,916 $156,310 37,059 $191,936 4,916 $187,020 33,524 $224,354 4,916 $219,438 29,639 51,067 86,945 119,251 153,496 189,799 17,873 $33,194 30,431 $56,514 41,738 $77,513 53,724 $99,772 66,429 $123,370 Earnings Before Taxes Income Taxes Net Income Balance sheets Begin Cash Inventory Prepaid Leases Total Current Assets Year 1 Year 2 Year 3 Year 4 Year 5 $33,150 425,000 28,000 $110,697 425,000 28,000 $210,697 424,781 28,000 $243,259 446,020 28,000 $293,834 $363,370 468,321 491,737 28,000 28,000 $486,150 $563,697 $663,478 $717,279 $790,155 $883,107 Fixed Assets Less: Depreciation Net Fixed Assets Total Assets 33,850 0 33,850 $520,000 33,850 4,916 28,934 $592,631 33,850 9,832 24,018 $687,496 33,850 14,747 19,103 $736,382 33,850 33,850 19,664 24,579 14,186 9,271 $804,341 $892,378 Accounts Payable Long Term Debt Total Liabilities Owner's Equity Paid-in Capital Retained Earnings Total Liabilities & Equity 0 468,000 468,000 68,908 438,529 507,437 139,654 406,133 545,787 146,637 370,522 517,159 153,968 331,377 485,345 161,667 288,346 450,013 52,000 0 52,000 33,194 52,000 89,709 52,000 167,223 52,000 266,996 52,000 390,365 $520,000 $592,631 $687,496 $736,382 $804,341 $892,378 Cash Flow Statements Year 1 Year 2 Year 3 Year 4 Year 5 $94,266 4,916 99,182 $127,219 4,916 132,135 $156,310 4,916 161,226 $187,020 4,916 191,936 $219,438 4,916 224,354 Working Capital Investment -68,908 -70,966 14,256 14,968 15,719 Cash From Operations 168,090 203,101 146,970 176,968 208,635 Interest Expense Income Taxes Net Cash Before Debt Pmt Debt Payment Change in Cash 43,199 17,873 40,274 30,431 37,059 41,738 33,524 53,724 29,639 66,429 107,018 132,396 68,173 89,720 112,567 29,471 $77,547 32,396 $100,000 35,611 $32,562 39,145 $50,575 43,031 $69,536 Cash Reconciliation Beginning Cash $33,150 $110,697 $210,697 $243,259 $293,834 Operating Profit Add: Depreciation Change in Cash Ending Cash 77,547 $110,697 100,000 $210,697 32,562 $243,259 50,575 $293,834 69,536 $363,370