1. AA corp. is considering the acquisition of TT Corp. The following 4-year projected free cash flows to the firm (FCFF) of TT Corp. has been generated

Year	1	2	3	4
FCFF ($ million)	580	700	810	890

The weighted average cost of capital (WACC) for the first four years is estimated at 15% per year. Thereafter, the WACC will decline to 12%. After year 4, the FCFF are expected to grow at 4% per year. You are also told that TT Corp. has three sources of debt capital as follows: (i) 3.4% interest rate amortizing bank loan. The outstanding loan balance is $190 million (ii) 1 million, 15-year zero coupon bonds issued 6 years ago. The yield to maturity of the bonds is 4% (iii) 2 million, 15-year 3.728% coupon bonds issued 5 years ago. The yield to maturity of the bonds is 5%. (iv) The par of face value of each zero coupon and coupon bond is $1000

A) What is the present value of the terminal value of TT Corp?

a. $6615.19 million

b. $11,570.00 million

c. $4811.00 million

d. $8414.55 million

B) Using the information provided in exhibit 3, What is the enterprise value (EV) of TT Corp?

a. $8690.28 million

b. 2075.10 million

c. $8182.42 million

d. 9570.99 million

C) Using the information provided in exhibit 3, what is the market value of debt capital of TT Corp?

a. $1229.23 million

b. $1419.12 million

c. $2690.29 million

d. $2500.29 million

D) Using the information provided in exhibit 3, what is the percent cost of debt of TT Corp if the tax rate is 25%?

a. 4.63%

b. 4.39%

c. 4.13%

d. 3.29%

e. 3.47%

E) Using the information provided in exhibit 3, compute the maximum price to pay for each share of TT Corp if the firm has 200 million shares.

a. $31.90

b. $28.00

c. $36.36

d. $30.00

e. $ 35.00