XYZ Limited is a private company located in Nairobi County. The company manufactures and sells various products. You have been tasked with the assignment of valuing the private firm using discounted cash flow approach. You have been provided with the following information for the company and that of ten similar firms in the industry.

(i) Data for XYZ Limited for the most recent period

Revenues	Sh. 30 Million
Earnings Before Interest and Tax	Sh. 10 Million
Capital Expenditure	Sh. 4 Million
Working Capital Investment	Sh. 2 Million
Depreciation	Sh. 2 Million

(ii) Corporate tax rate relevant for XYZ Limited is 30%. The before tax cost of debt of XYZ Ltd. is 10 %

(iii) Extracts from the statement of financial position for the most recent period is as shown below

Ordinary Share Capital (Sh. 1.5 Par value)	Sh. 300 Million
Borrowings	Sh. 150 Million

(iv) The average beta of ten comparable companies in the same industry as XYZ Ltd is 1.5 based on market value of debt and equity.

(v) On average, market value of equity is twice the book value whereas market value of debt equals to the book value.

(vi) The average debt equity ratio of the industry is 0.45

(vii) Average return on market and risk free rate of return is 12 % and 5 % respectively.

Additional information:

(a) XYZ Ltd expects Revenues, Earnings before Interest and Tax, Capital Expenditure, Investment in Working Capital and Depreciation to grow at an annual rate of 6 % each year for 20 years.

(b) After the twenty year growth period, the growth in Revenues, Earnings before Interest and Tax and Investment in Working Capital will decline to stable 3 % each year into the foreseeable future.

(c) During the steady state period, investment in fixed capital and Non-cash charges will offset each other.

Required:

(i) Compute Free cash flow to XYZ Ltd. for the most recent period

(ii) Compute weighted average cost of Capital

(iii) Compute Terminal value for XYZ Ltd.

(iv) Compute the value of operations of XYZ Ltd.