An analyst has used the percent of sales to method forecast the items in the table below for 2012-2014 for New Energy, Inc, which is all equity financed. The beta for company's stock is 1.2 and the company's taxrate is 38%. Assume a risk free rate of 4% and a equity market risk premium of 5%
| Estimates for New Energy, Inc |
|
|
|
|
| Amounts in $Millions |
|
|
|
|
|
|
|
|
|
|
2011 Actual |
2012 Forecast |
2013 Forecast |
2014 Forecast |
| Operating Income (EBIT) |
2,410 |
2,555 |
2,790 |
2,958 |
| Net Plant and Equipment |
8,326 |
8,826 |
9,355 |
9,916 |
| Operating Current Assets |
5,551 |
5,884 |
6,237 |
6,611 |
| Operating Current Liablilities |
1,680 |
1,781 |
1,887 |
2,001 |
a - Calculate the cost of capital for the company?
b - What is the net operating profit after taxes (NOPAT) for 2012?
c. What is the net operating capital NOWC and total net operating capital (NOC) for each of the years 2011 and 2012?
d. What is the free cash flow for 2012?
e. Using your forecast of free cash flow for 2012, and assuming you have also forecast that the free cash flow for 2013 is $954 million, the free cashflow for 2014 is $1,013 million and the terminal value in 2014 is $17,558 million. Draw timeline for cash flows that investors expect to recieve in 2012, 2013 and 2014 and estimate New Energy, Inc's enterprise value based on the forecasts?