6. Abbey Taylor, CFA, has been directed to determine the value of Sundanci's stock using the FCFE valuation model. Taylor believes that Sundanci's FCFE will grow at 18% for years 2020, 2021, 2022, and 2023, and 6% thereafter. Capital expenditures, depreciation, and working capital are all expected to increase proportionately with FCFE. Assume that the corporate tax rate is 35%. Using the data from Table 1, calculate the value of a share of Sundanci stock at the end of year 2019 based on the two-stage FCFE valuation model. Table 1. Sundanci actual 2018 and 2019 financial statements for fiscal years ending May 31(5 Million, except per-share data) 2018 $474 368 Income statement Revenue Total operating costs Depreciation Earnings before interest & Taxes (EBIT) Interest Taxes Net income Common shares outstanding (millions) 2019 $598 460 23 115 18 33.95 24.85 46.15 84.0 63.05 84.0 2018 $201 474 2019 $326 489 815 141 675 Balance sheet Current assets Net property, plant and equipment Total assets Current liabilities Long-term debt Total liabilities Shareholders' equity Total liabilities and equity Capital expenditures 36 uo 38 Selected financial information Required rate of return on equity WACC Growth rate of industry Industry P/E ratio 16% 14% 13% 26 6. Abbey Taylor, CFA, has been directed to determine the value of Sundanci's stock using the FCFE valuation model. Taylor believes that Sundanci's FCFE will grow at 18% for years 2020, 2021, 2022, and 2023, and 6% thereafter. Capital expenditures, depreciation, and working capital are all expected to increase proportionately with FCFE. Assume that the corporate tax rate is 35%. Using the data from Table 1, calculate the value of a share of Sundanci stock at the end of year 2019 based on the two-stage FCFE valuation model. Table 1. Sundanci actual 2018 and 2019 financial statements for fiscal years ending May 31(5 Million, except per-share data) 2018 $474 368 Income statement Revenue Total operating costs Depreciation Earnings before interest & Taxes (EBIT) Interest Taxes Net income Common shares outstanding (millions) 2019 $598 460 23 115 18 33.95 24.85 46.15 84.0 63.05 84.0 2018 $201 474 2019 $326 489 815 141 675 Balance sheet Current assets Net property, plant and equipment Total assets Current liabilities Long-term debt Total liabilities Shareholders' equity Total liabilities and equity Capital expenditures 36 uo 38 Selected financial information Required rate of return on equity WACC Growth rate of industry Industry P/E ratio 16% 14% 13% 26