1. You have been asked to value a car dealership that has Free Cash Flow to the Firm projected at $350,000 for next year. This cash flow amount is expected to grow by 2% at the end of year 2 and every year thereafter. The appropriate risk adjusted discount rate is 8% and there are one million shares outstanding. What is the value per share?
2. You are about to take over a local computer chip maker that hasprojected Free Cash Flow to the Firm of $19 million. This is expected to grow by 1% in the following year, and forever thereafter. The firm has borrowed heavily with a face value of non-callable bonds outstanding of $125 million (market value: $130 million). There is also an un-funded pension liability of $35 million that will need to be corrected.The appropriate risk adjusted annual discount rate is 10%.What is the value per share if there are 20 million shares outstanding?