1. You have been hired as a consultant to develop a valuation model for Whale, Inc. Management has provided you with partial income statement and balance sheet. Below is information for the most recent year (2020, year 0) and projected information for 2021. All numbers are in millions. After 2021, the firm is expected to grow at 3% in perpetuity. The weighted average cost of capital (WACC) is 12% and the corporate tax rate is 25%. There are 200 million shares outstanding. Show Steps

1. What is your estimate of 2021 free cash flow? (50)

2. What is your estimate of the value of Whale, Inc as of January 1, 2021? Assume that 2020 free cash flow has already been distributed. (30)

3. What is your estimate of a single share of stock in Whale, Inc.? (20)

(Actual) 2020 Forecasted 2021 Income Statement ($ millions) Revenues Cost of Goods Sold Depreciation expense SG&A expense EBIT Interest expense Earnings before taxes Taxes Net Income 10,000 6,000 200 1,200 2,600 100 2,500 625 1,875 11,000 6,600 240 1,320 2,840 100 2,740 685 2,055 Balance Sheet Assets Cash Accounts Receivable Inventory Total Current Assets Gross PPE Accumulated Depreciation Net PPE Total Assets 2,300 3,400 1,250 6,950 14,500 3,000 11,500 18,450 2,484 3,672 1,350 7,506 15,660 3,240 12,420 19,926 Liabilities & Equity Accounts Payable 1,335 Long Term Debt 6,115 Common Stock 1,000 Retained Earnings 10,000 Total Shareholder's Equity 11,000 Total Liabilities & Shareholders' Equity 18,450 1,442 7,340 1,000 10,144 11,144 19,926