3. The date is 12/31/2022. Kilroy Machine (KM) is a Seattle-based machine shop that manufactures extremely high-quality parts for their parent company United Aerospace (UA), a large British-based aerospace manufacturer. KM has no debt and is 100% owned by United Aerospace (UA). UA plans to sell KM, along with several of its other US manufacturing subsidiaries as part of a strategic reorganization. The manager of the UA division that owns KM, along with a dozen other small US manufacturing firms, has approached KM CEO, Janet Yang, to offer her a chance to buy the firm. The manager of the UA division that owns KM is under heavy pressure to 'clean up' his division's assets as part of the strategic reorganization. As part of that initiative, he has offered to sell KM to Yang for a total price of $5M. Yang has been the CEO of KM for 10 years. She believes that UA senior leadership is underutilizing KMs capacity. She has argued for several years that UA should allow KM to take on outside customers but has been rejected by UA division managers. UA position was that it was not interested in taking the time to expand such a small (to them) operation. Yang believes that if she were allowed to pursue customers outside of UA, KM would be well positioned. She believed that there was a niche market for KM's machining services that competitors would find it hard to match. As a result, KM would be able to charge premium prices to customers who value its unique production capacity. Under her leadership, Yang's projects KM sales in 2023 of $5,342,321. She expects about 10% per annum growth in Sales in 2024 and 2025. By that time, Yang believes that competition will enter with similar capacity. As a result, she expects that Sales will be flat after 2025. Furthermore, Yang projects that KM's gross margin will tighten from around 29% to around 26%. In addition, Yang expects SG&A expenses to rise to about 15% of Sales. Yang's projections for 2023 and beyond are given in the Spreadsheet Attachment, along with selected financial information. Note that KM maintains no cash balances. Janet and her team have taken care to keep their projections private. UA's heavily bureaucratic management structures mean that no one at UA has seen Janet's projections. Furthermore, her negotiating counterparts do not realize what she plans to do with the firm when she buys it, or how much KM is actually worth (i.e., what it is worth under her leadership). Their goal is to sell the firm quickly for what they can get. KM's CFO has put together a financing package for the deal after 'shopping around' among many lenders and potential equity partners. She found that the best terms were offered by ZRT Bank and PY Equity. Both ZRT Bank and PY Equity face intense competition for deals and were happy to be included in the deal. The financing package calls for a loan of $4M from ZRT bank and a $800K common equity investment from PY Equity. The loan would have an interest rate of 8%, a 12-year term and annual payments of about 531K. Yang would be the CEO and provide the balance of the equity investment out of her personal funds in exchange for the remainder of the common equity. The Sources and Uses of funds under the proposed financing package can be found in the Spreadsheet Attachment. In addition, the Spreadsheet Attachment presents a partially completed table showing the various owners of the commen equity (i.e., Janet, PY Equity and the ESOP). The Spreadsheet Attachment also includes financial market information, and information about the industry average debt, and equity betas, as well as industry average Debt-to-Value (i.e., D/V) ratio. a. Using the income statement, working capital, and fixed asset projections in the Spreadsheet attachment, project the FCF for KM, under Yang's leadership, for 2023 and beyond. b. What is the value of KM's future FCFs? . What fraction of the equity would PY Equity get in this deal? How many shares would they get? d. What fraction of the equity would Janet get? How many shares would she get? e. What would be the price per share of the common equity in this deal? f. Fillin the Firm Diagram with the values of the Assets, the FCF and the Value Add. g. Fillin the provided Deal Diagram with the following. The value of the firm under Janet's leadership (i.e., the value of the FCF using Janet's assumptions). * The value of Janet's equity claim. The value of PY Equity's claim