9.        We find thefollowing information on NPNG (No-Pain-No-Gain) Inc. (18 markstotal)

• EBIT = $2,000,000
• Depreciation = $250,000
• Change in net working capital = $100,000
• Net capital spending = $300,000

These numbers are projected toincrease at the following supernormal rates for the next threeyears, and 5% after the third year for the foreseeablefuture:

• EBIT: 10%
• Depreciation: 15%
• Change in net working capital: 20%
• Net capital spending: 15%

The firm’s tax rate is 35%,and it has 1,000,000 outstanding shares and $6,000,000 in debt. Wehave estimated the WACC to be 15%.

1. Calculate the EBIT, Depreciation, Changes in NWC, andNet Capital Spending for the next fouryears.                                                                            

b. Calculate the CFA* for eachof the next four years, using the following formula:

d. Calculate the present value of growing perpetuity atYear 3.                 (1 mark)

e. Calculate the firm’s valueat time 0 using the WACC of the firm as the discount rate. (Notethat the first CFA* to be discounted is the cash flow from one yearinto thefuture.)                                                                                         

f.   Calculate thefirm’s equity value at time0.                                                   (1 mark)

g. Calculate the firm’s shareprice at time0.                                         (1 mark)