Select a company that (1) is not one of the three principal/largest companies in its industry, and (2) for which financial information for the company and the industry is available for the current year and for three prior years.

Using the most recent financial statements for the company together with other current information, calculate the value of the company using the methods described below.

Perpetuity based valuation method

1a. Determine the cash flow for the company for the most recent year. (Use the sum of operating cash flow and investment cash flow from the cash flow statement.)

b. Estimate a growth rate for the company. (Use any appropriate method, such as average sales growth rate, average earnings growth rate, or average growth rate in cash flow). Specify how you determine the growth rate used.

c. Estimate the required return for the company using the capital asset pricing model. Specify your assumptions about the risk free and the expected market return.

d. Use the growing perpetuity formula to estimate the value of the company.