4 Your firm wants to buy AZ Corporation. Your assistant has made the following cash flow forecast (in millions): 1 2 3 Year $1,200 $1,200 $1,400 Sales Net Operating Profit after taxes $100 $105 $111 Depreciation $10 $25 $30 Current value of Net fixed assets $110 Current value of Net working capital=$70 As percent of sales, net fixed assets will increase by 11% As percent of sales, net working capital will increase by 7% Beginning in year 4. AZ's free cash flows will be $70 million per year forever (perpetuity). AZ has $50 million in long-term debt and there are one million shares outstanding AZ's WACC is 99 1. Calculate AZ's free cash flows for years 1-3, including the horizon value. 2. What price per share should you offer AZ's shareholders, assuming no synergies? 3. Now suppose the merged firms will save $10 million before tax per year in costs for the next five years What is the maximum price per share you can offer without destroying value, assuming a tax rate of 21% for your fum? 4 Your firm wants to buy AZ Corporation. Your assistant has made the following cash flow forecast (in millions): 1 2 3 Year $1,200 $1,200 $1,400 Sales Net Operating Profit after taxes $100 $105 $111 Depreciation $10 $25 $30 Current value of Net fixed assets $110 Current value of Net working capital=$70 As percent of sales, net fixed assets will increase by 11% As percent of sales, net working capital will increase by 7% Beginning in year 4. AZ's free cash flows will be $70 million per year forever (perpetuity). AZ has $50 million in long-term debt and there are one million shares outstanding AZ's WACC is 99 1. Calculate AZ's free cash flows for years 1-3, including the horizon value. 2. What price per share should you offer AZ's shareholders, assuming no synergies? 3. Now suppose the merged firms will save $10 million before tax per year in costs for the next five years What is the maximum price per share you can offer without destroying value, assuming a tax rate of 21% for your fum