1. Financial Corporation plans to acquire Great Western Inc. In the current year the free cash flow to firm (FCFF) of Great Western Inc is $20 million. It is projected to grow at 20% per year for the next five years. After the first five years it is expected to grow at a more modest 10% per year. The Financial Corporation estimates that the target firms cost of capital will be 20% during the next five years and then will drop to 15% after the fifth year. Calculate the enterprise value of Great Western Inc. Assume Great Western Inc has no non-operating assets, non-operating liabilities and cash. Show all your workings.

2. What are the primary objectives of leveraged recapitalization?