You have been tasked with determining a fair stock price for Shire Brewing, a local craft beer

manufacturer that will soon be going public for $$28$ per share. You are interested in investing in

this company, but only if it is fairly priced $($or undervalued$).$ You have decided to use the free

cash flow approach to determine the intrinsic price per share and have compiled the following

data:

Free Cash Flow Data Other Data

Year $($t$)$ FCF Growth rate of FCF beyond year $4=5\%$

$1$ $$650,000$ Weighted average cost of capital $=11\%$

$2770,000$ Market Value of all debt $=$ $$2,300,000$

$3980,000$ Number of common shares outstanding $=500,000$

$41,250,000$ Value of non$-$operating assets $=$ $$1,000,000$

a$)$ What is the intrinsic price per share?

b$)$ Based on the calculated intrinsic price and the offer price of $$28$ should you buy the

stock and why$/$why not?

c$)$ If the book value of equity is $10,000,000,$ what is the market value added of Shire

Brewing?