Walleye Feeders Inc. Valuations

See the table below showing a three-year forecast for Walleye Feeders Inc. and complete the following valuation scenarios:

Year 2013 2014 2015

Free cash flow ($ millions) $-20 $48 $54

1. Estimate the fair market value of Walleye Feeders at the end of 2012. Assume that after 2015, free cash flows are expected to grow at a constant rate of 12.5% and Walleye Feeders’ weighted-average cost of capital is 14 percent.

2. Estimate the fair market value per share of Walleye Feeders’ equity at the end of 2012 if the company has 50 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $55 million.