You are performing a discounted cash flow valuation of the BDB

Consider the following projected cash flows:

Year	CF to Equity	Int(1-t)	CF to Firm
1	ISK 500	ISK 50	ISK 550
2	ISK 550	ISK 55	ISK 605
3	ISK 600	ISK 60	ISK 660
4	ISK 660	ISK 65	ISK 725
5	ISK 720	ISK 70	ISK 790
Terminal value	ISK 15,958		ISK 16,353

(The terminal value of the equity/firm is at the end of year 5)

The market value of debt is ISK 650 // The book value of debt is ISK 700

The market value of equity is ISK 8,500 // The book value of equity is ISK 3,000

The firm faces a tax rate of 20%

The 10-year Icelandic government bond yield (AAA rated) is 3.5%

The unlevered beta for the board game industry is 0.9

The firm's pre-tax cost of debt is 6%

The mature market equity risk premium (ERP) is 5.5%

Answer the following:

1. What is the firm's beta?

2. What is the firm's cost of equity?

3. What is the firm's weighted average cost of capital (WACC)?

4. What is the present value of cash flows to equity?

5. What is the present value of cash flows to the firm?

6. How would you arrive at the value of equity by using FCFF and debt?

7. Based on your valuation results, what recommendation would you issue regarding this firm and why?