You have been provided the following information on CEL Inc, a manufacturer of highend stereo systems.
- In the most recent year, which was a bad one, the company made only $40 million in net income. It expects next year to be more normal. The book value of equity at the company is $1 billion and the average return on equity over the previous 10 years (assumed to be a normal period) was 10%.
- The company expects to make $80 million in new capital expenditures next year. It expects depreciation, which was $60 million this year, to grow 10% next year.
- The company had revenues of $1.5 billion this year and it maintained a non-cash working capital investment of 10% of revenues. It expects revenues to increase 20% next year and working capital to decline to 9.5% of revenues.
- The firm expects to maintain its existing debt policy (in market value terms). The market value of equity is $1.5 billion and the book value of equity is $500 million. The debt outstanding (in both book and market terms) is $500 million. Estimate the FCFE next year.