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ITE could achieve $6 million in sales in five years, and $14 million in 10 years, with a target 20% growth rate. This was an ambitious goal, given that the industry was only growing at 2.4%. It is estimated that plant, property and equipment would average 15-20% of sales to support this level of growth. While, some of the income statement and balance sheet accounts varied in recent years, it was a fair approximation to use averages of the accounts as a percent of sales over the past three years. Overall, the past statements were reflective of the future. Growth would be much more modest after 10 years, with sales growing at the rate of inflation and low maintenance capital expenditure equaling low depreciation expenses.

Refer to the Excel Attachment. Use the guide attached to help solve the problem. Please know that for this analysis you will be required to have a list of assumptions explaining the values you used for your analysis of the following:

Use the ITE Case Exhibits excel file to calculate the following. Please add tabs to the spreadsheet for each of the following tasks.

• Value ITE using discounted cash flow.
a. Calculate WACC. Find cost of equity using beta information in Exhibit 3 and market data in Exhibit 4.
b. Create forecasted free cash flows for ITE using information in Exhibit 2
c. Find the value of ITE using free cash flow discounted by WACC, and using a growing perpetuity to calculate terminal value.

• Value ITE using comparable transactions in Exhibit 1.