You are told that the enterprise value of a firm is equal to its market value of equity plus any net

debt the company holds. In other words,

Enterprise Value $($EV$)=$ Market Value of Equity $($MV$)+$ Debt $$ Cash.

$($Net debt is debt minus cash$)$

Furthermore, you are told that EV is the present value of the firm$$s free cash flows $($FCF$).$ FCF is

essentially the total amount per annum that the firm has available to pay out to both equity holders

and debt holders. FCF comes from company earnings after deducting for tax, investments and

changes in net working capital. You do not need to worry too much on how FCF is derived $$ that is

for $2$nd year corporate finance.

Simpkins FCFs $($year$-$end figures$)$ are currently projected as:

$20212022202320242025$

FCF $1$ mil $1\mathrm{.}1$ mil $1\mathrm{.}2$ mil $1\mathrm{.}5$ mil $1\mathrm{.}55$ mil

Assume FCFs after $2025$ will grow at $3\%$ for the next $3$ years and $2\%$ thereafter.

Assume the cost of capital $($discount rate$)$ is $10\%.$

Net Debt is $1$m$.$

The company has $16$mil shares outstanding.

i$)$ What is the current value of Simpkins shares?