You are an investment analyst at FI Investments tasked to value FBC firm a Southern Agricultural Conglomerate. The following financial information was recently released for FBC. The company's 2018 and 2017 annual financial reports are contained in tables 1 and 2 below, along with important additional information:

Table 1: FBC statement of financial position (R millions)

2018 2017

Cash and equivalents R149 R83

Accounts receivable 295 265

Inventory 275 285

Total current assets R719 R633

Total fixed assets 3 909 3 856

Accounts payable 228 220

Notes payable 0 0

Total current liabilities 228 220

Long term debt 1 800 1 650

Total liabilities and shareholders equity 3 909 3 856

Number of shares outstanding (millions) 100 100

Additional information:

Depreciation (2018): R483.

The firm spent R250m in profitable projects during the course of 2018

WACC : 15%

Cost of equity of the firm: 10%

Tax rate : 40%

Table 2: FBC statement of comprehensive income

(R millions except for share data)

2018 2017

Total revenues R3 175 R3 075

EBIT 495 448

Interest expense 104 101

Net Income 235 208

Dividends per share R0.80 R0.80

Use the information given, to answer the following:

a) Calculate the Free Cash Flow to the Firm (FCFF) for the year 2018.[7 marks]

b) You are told that the Free Cash Flow to Equity (FCFE) of the firm will continue to grow at a rate of 5% for the next 3 years, after which it will stabilize to a rate of 3%. Calculate the intrinsic value of each of FBC' shares. 9 (Use 2.d.p in your calculations & final answer for this question)

[13 marks]

The question requires:

-Net Working Capital (2017)

-Net Working Capital (2018)

-FCFF0

-FCFE0

-FCFE1

-FCFE2

-FCFE3

-FCFE(t+1)

-P_n

-Value of equity

-Value per share