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 beta is $1\mathrm{.}20$ 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 flows and

selling price are as follows.

To finance the purchase, the investors have negotiated a $$540$ million, five$-$year loan 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.

Answer is complete but not entirely correct.

Target firm's asset

beta

b$.$ Estimate the target's unlevered, or all$-$equity, cost of capital $(K_A).$

Note: Round your answer to $1$ decimal place.

Answer is complete but not entirely correct.

Target's unlevered, or all$-$equity, cost of capital $($KA$)$

c$.$ Estimate the target's all$-$equity present value.

Note: Enter your answer in millions rounded to $2$ decimal places.

Answer is complete but not entirely correct.