A multinational furniture manufacturing firm, Chester Ltd. in the US is planning to present a bid offer to acquire Digby Ltd. Digby is a medium-sized company involved in manufacturing of the small, trendy and affordable unique furniture items. They specialize in providing furniture pieces to hotels and hostels in many states in the US. However, Chester Ltd. till now has not expanded into this target segment and the board at Chester Ltd. feels that acquiring Digby Ltd. with their own brand name will help both Chester and Digby. Many of their common operational overheads could be reduced substantially. Digby's capital structure consists of mainly bank borrowings at the rate of 8%. However, Chester Ltd. being a multinational firm with strong financial history sources the loans at the rate of 5%. On the other hand, the change of Chester Ltd. stock return with respect to market return are more volatile and higher than Digby. The beta of Chester is 1.2 whereas for Digby it is 0.8. Risk free rate and market premium are 5% and 7% respectively with tax rate to be 25% for both the companies. D/E ratio of Chester Ltd. is 1.2, whereas for Digby Ltd. it is 1.4. The following data to estimate the firm cash flows are given as follows:Current revenues (actual) are $362 million and are expected to growth at 5% every year from year 1 to year 5 (expected). At the end of year 5, the firm will be in stable growth, growing 4% a year in perpetuity. Operating margin is 1.5% of revenues, taxes are 35%. Capex remains same as $100 million, and every year non-cash working capital changes are $20 million, depreciation amounts to 2% of total revenue every year.Estimate the firm value of Digby Ltd. for Chester Ltd.