1. In early 2011, Amalgamated Fruit Plc was interested in acquiring Dynatech, Inc., a privately-held, electronics company. As a first step in deciding what price to bid for Dynatech, Amalgamated's finance department has prepared a five-year financial projection for the company assuming an acquisition. Use this projection and Dymatech's 2010 actual financial figures to answer the questions below. Dynatech Inc. 5-year Financial Projection (S millions) 2010 2011 2012 2013 2014 2015 Income statement 243 257 321 386 443 461 Net sales Cost of sales 95 98 116 135 155 161 Gross income 148 159 251 Depreciation 124 149 120 11 Interest expense 19 17 14 operating expenses 24 37 54 67 Net income before tax 45 27 32 43 100 119 Provision for taxes 17 21 45 Net income after tax 39 27 S 33 S 40 S 70 S 75 Balance sheet 41 11 S 13 16 S 18 S Cash and securities 19 Accounts receivable Inventory 32 47 47 67 Other current assets 18 15 17 Total current assets 132 97 107 124 144 149 Gross property and equipment 511 612 991 1,05 1,093 Accumulated depreciation 102 160 433 553 Net property and equipment 452 542 559 43 Goodwill 129 129 129 129 12 129 Total assets 670 678 778 812 708 Accounts payable 12 11 13 14 15 Short-term debt 18 Current portion long-term debt Accrued expenses 12 13 16 Total current liabilities 81 91 97 100 57 Long-term debt 201 181 234 217 (0) Deferred taxes 42 45 51 61 Shareholders equity 348 375 447 517 591 Total liabilities and equity 670 S 678 S 778 S 812 S 772 708 a. Estimate Dynatech's free cash flow from 2011 through 2015. b. Estimate the present value of Dynatech's free cash flow for the years 2011 2015. Amalgamated's WACC is 7.4 percent. Dynatech's WACC is 11 percent, and the average of the two companies WACCs, weighted by sales, is 7.6 percent