You are a senior financial analyst of a firm based in Melbourne. You have been assigned with the task of training

interns who recently joined your firm on how to use the free cash flow model to estimate the value of a company.

You have collected data on the following data:

Year 2019 2020 2021 2022 2023

Long-term Debt ($M) 46000 46,000 47,000 48,000 50,000

Profits ($M, after tax) 12,000 18,000 16,000 22,000 25,000

Interest ($M, after tax)900 950 1,050 1,150 1,275

Working Cap ($M) 10,000 9,000 12,000 20,000 18,000

Depreciation ($M) 26,000 27,000 28,000 28,000 30,000

Cap Spending ($M) 25,150 27,00 31,000 35,000

Cost of equity 0.11 0.12 0.13 0.112

WACC 0.12 0.12 0.13 0.12

Number of equity shares (Million) 2,000

Terminal growth rate 0.07

Using the information you have collected above, perform calculations to explain to interns as to how the

following are calculated:

i. Free cash flow to firm

ii. Free cash to equity

iii. Value of the firm according to the free cash flow to firm method

iv. Value of the firm according to the free cash flow to equity method

v. Estimated price of an equity share according to the free cash flow to firm method and the free

cash flow to equity method

Notes: You need to show detailed calculations for each year in order to receive full marks for this

question.