A group of investors is intent on purchasing a publicly traded company and wants to estimate the highest price they can reasonably justify paying. The target company's equity bete is 120 and its debt-to-firm value ratio measured using market values, is 60 percent The investors plan to improve the target's cash flows and sell it for 12 times free cash flow in year five. Projected free cash flow and Selling price are as follows Free cash flos Selling price Total free cash flows (5 millions) 342 517 362 367 3 67 5804 To finance the purchase, the investors have negotiated a $970 million, five-year loon at 8 percent interest to be repaid in five equal payments at the end of each year, plus interest on the declining balance. This will be the only interest-bearing debt outstanding after the acquisition Selected Actional Information Tax rate 40 percent Risk free interest rate percent Market risk pro Spect a Estimate the target firm's 1st bets (Round your answer to 2 decimal places) Tarotes GO b. Estimate the target's unlevered, or all-equity, cost of capital (Hound your answer to 1 decimal place! Targers unleverd, or a cost KA Estimate the target's loquity present value. (Enter your answer in milions rounded to 2 decimal places d. Estimate the present value of the interest to thelds on the acquisition de discounted at KA Round intermediate calculations to decimal place Enter your answer in ons rounded to 2 decimal places) A group of investors is intent on purchasing a publicly traded company and wants to estimate the highest price they can reasonably justify paying. The target company's equity bete is 120 and its debt-to-firm value ratio measured using market values, is 60 percent The investors plan to improve the target's cash flows and sell it for 12 times free cash flow in year five. Projected free cash flow and Selling price are as follows Free cash flos Selling price Total free cash flows (5 millions) 342 517 362 367 3 67 5804 To finance the purchase, the investors have negotiated a $970 million, five-year loon at 8 percent interest to be repaid in five equal payments at the end of each year, plus interest on the declining balance. This will be the only interest-bearing debt outstanding after the acquisition Selected Actional Information Tax rate 40 percent Risk free interest rate percent Market risk pro Spect a Estimate the target firm's 1st bets (Round your answer to 2 decimal places) Tarotes GO b. Estimate the target's unlevered, or all-equity, cost of capital (Hound your answer to 1 decimal place! Targers unleverd, or a cost KA Estimate the target's loquity present value. (Enter your answer in milions rounded to 2 decimal places d. Estimate the present value of the interest to thelds on the acquisition de discounted at KA Round intermediate calculations to decimal place Enter your answer in ons rounded to 2 decimal places)
