EBIT 1. Revex operates a chain of pharmacies around the country. You have been provided with...

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EBIT 1. Revex operates a chain of pharmacies around the country. You have been provided with the following projections for the firm (in millions of dollars) 2 3 $ 100.00 $ 125.00 $ 156.25 4 (Terminal year) $ 164.06 Net Cap Ex 30 37.5 46.5 32 Total Working 60 70 82 88 Capital Cost of Equity 12% 11.% 11% 10% Pre-tax Cost of 8.00% 7.50% 7% 7% borrowing Debt to Capital 25% 25% 25% 25% Ratio The firm has a marginal tax rate of 40%, but it has net operating losses of $175 million that it is carrying forward. The firm will grow at 5% forever, starting in year 4. The working capital currently is $ 52 million. a. Estimate the expected cash flows to the firm for the next 3 years. b. Estimate the cost of capital each year for the next 3 years. c. Estimate the terminal value at the end of year 3. d. Estimate the value of the firm today. (2 points) (2 points) (1 point) (2 points) EBIT 1. Revex operates a chain of pharmacies around the country. You have been provided with the following projections for the firm (in millions of dollars) 2 3 $ 100.00 $ 125.00 $ 156.25 4 (Terminal year) $ 164.06 Net Cap Ex 30 37.5 46.5 32 Total Working 60 70 82 88 Capital Cost of Equity 12% 11.% 11% 10% Pre-tax Cost of 8.00% 7.50% 7% 7% borrowing Debt to Capital 25% 25% 25% 25% Ratio The firm has a marginal tax rate of 40%, but it has net operating losses of $175 million that it is carrying forward. The firm will grow at 5% forever, starting in year 4. The working capital currently is $ 52 million. a. Estimate the expected cash flows to the firm for the next 3 years. b. Estimate the cost of capital each year for the next 3 years. c. Estimate the terminal value at the end of year 3. d. Estimate the value of the firm today. (2 points) (2 points) (1 point) (2 points)