In the current year, the sales of the firm is $25,000, the depreciation is $100. Interest paid on debt is $32 and interest earned on cash and marketable securities is $6. Cash and marketable securities is $80, cumulative depreciation is $300, stock is $450, and accumulated retained earnings are $150.

The sales growth rate will be 15% per year. The ratio of current assets/sales is 15%, current liabilities/sales is 8%, net fixed assets/sales is 70%, and costs of goods sold/sales is 50%. The depreciation rate is 10%, the interest rate on debt is 10%, and the interest rate on cash and marketable securities is 7%. The firm has a tax rate of 40% and a dividend payout ratio of 90%.

The firm decides to keep the cash and marketable securities constant, and raise the fund needed from borrowing additional debt (i.e. no additional stock issuing). We assume that the firm’s free cash flow will grow at a constant rate of 5% after year 6. WACC is 10%. How much additional debt does the firm need to borrow each year for the first 6 years? What is the enterprise value of the firm (assume mid-year accounting)?

Please submit an Excel sheet on Canvas. Please highlight your answers.