XYZ develops computer products for consumers. In June 2013, a team of analysts issued a research report that valued XYZ's stock at $7.89 per share, compared to the then-current market price of $10. The research report's discounted cash flow valuation table is reproduced below. The 2013 figures are as reported by XYZ, but the 2014 through 2021 figures are analysts' forecasts. Key assumptions include a weighted average cost of capital of 13%, cost of equity 8% and a perpetual growth rate of 1%. All dollar amounts are in millions except share value. Analyst Forecast Actual 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Revenues: 120 130 186.3 218.1 239.2 280.5 315.2 363.2 410.3 EBITDA 6 9 16 28 35 69 76.5 113.1 145.4 Capital expenditures -0.6 -1.9 -2.1 -2.4 -3.9 -6 -7.2 -9.3 -8.5 Cash taxes -1.8 -2 -3 -9.8 -2.9 -5.6 -6.6 -11.5 -15.1 Free cash flow 3.6 5.1 10.9 15.8 28.2 57.4 62.7 92.3 121.8 Discount factor: 0.884956 0.783147 0.69305 0.613319 Present value 0.54276 0.480319 0.425061 4.513274 8.536299 10.95019 17.29559 31.15442 30.11597 0.37616 39.2331 45.81627 Present value beyond 2021 385.6203 Present value 2014-2021 187.6151 573.2354 Less net debt 60.1 Equity value Shares ourstanding Share value Required: 513.1354 65 7.894391 1, Comment on how the analyst of XYZ calculate free cash flow compares with how the professional CFA might compute free cash flow directly from the company's financial statements. (4 marks) 2, What role does the 8% cost of equity play in the discounted cash flow valuation analysis? How about the role of cost of equity in the abnormal earnings valuation analysis? (2 mark) 3, Explain in detail to someone unfamiliar with present value calculations about how the Present value 2014-2021(i.e. $187.6151) is computed. (4 marks)