You have been asked to value Oneida Steel, a midsize steel company. The firm reported $80 million in net income, $50 million in capital expenditures, and $20 million in depreciation in the just-completed financial year. The firm reported that its noncash working capital increased by $20 million during the year and the total debt outstanding increased by $10 million during the year. The book value of equity at Oneida Steel at the beginning of the last financial year was $400 million. The cost of equity is 10%.

1. 1. Estimate the equity reinvestment rate, return on equity, and expected growth rate for Oneida Steel. (You can assume that the firm will continue to maintain the same debt ratio that it used last year to finance its reinvestment needs.)
2. 2. If this growth rate is expected to last five years and then drop to a 4% stable growth rate after that and the return on equity after year 5 is expected to be 12%, estimate the value of equity today, using projected free cash flows to equity.