Problem 1: Based on your forecasts, calculate free cash flow to equity, free cash flow to the firm, and abnormal earnings for the next five years.
Problem 2: Use CAPM model to estimate Qantas' cost of equity. Then calculate WACC.
Problem 3: Assume long-term growth rate of 2% after year 5, calculate the terminal value and estimate the fundamental value per share using discounted free cash flow models and discounted abnormal earnings model.
Problem 4: Calculate the PE and PB ratios for major regional airlines. What would be Qantas' share price if it had the average PE or PB ratios?
Problem 5: Discuss possible reasons why your estimates of Qantas' fundamental value may differ from its share price.
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