5. In late 2013, soon after Ferris’s return as CEO, the firm receives an unsolicited offer of $210 million for its outstanding equity. If Ferris accepts the offer, the deal would close at the end of 2013. Suppose Ferris believes that Idexo can be sold at the end of 2018 for an enterprise value equal to nine times its final EBITDA. Idexo’s unlevered cost of capital is 10% (specifically, 10% is the pretax WACC). Based on your forecast of Idexo’s free cash flow in 2014–2018 in Question 3, and its final enterprise value in 2018, estimate the following:

a. Idexo’s unlevered value at the end of 2013.

b. The present value of Idexo’s interest tax shields in 2014–2018. (Recall that these tax shields are fixed and so have the same risk level as the debt.)

c. Idexo’s enterprise value at the end of 2013. (Add the present value of the interest tax shield in

(b) to the unlevered value of the firm in (a).)

d. Idexo’s equity value today. (Adjust the enterprise value in

(c) to reflect the firm’s debt and excess cash at the end of 2013.)