As an analyst at Austin's Private Equity Group in December 2022, you have been tasked with analyzing the potential acquisition of DOGS, a chain of Pet Food Stores in the Houston area. Your job involves estimating free cash flows, valuing the company, and analyzing several operating scenarios to take advantage of more debt financing. To estimate the free cash flows of PAWS, you assume that the 2023 revenues for DOGS stores will be $197,000 and the operating costs to run the stores will be $99,000. For the next 5 years (2023 to 2027), you expect that the revenues will grow at 5% per year and that the costs will grow at 3% per year. You expect no additional investments in CAPEX (and no depreciation). The increase in NWC will be $5,000 per year for the first 5 years. The current tax rate for this company is 19%. After the first 5 years, you expect the free cash flows of the company to grow at 4% per year. DOGS is currently all equity financed, but you estimate the company could borrow debt at a cost of 5.5%. Since DOGS is a private company, you don't have information about the beta of the company, but you know that PETSrUS, a private company in the same industry, has a cost of equity of 13.5% and a cost of debt of 5.5%, and plans to maintain a constant D/V ratio of .3. Q1: What are the FCFs for 2023 2027 (Year 1 through Year 5)? Q2: What are the current EV and MVE for DOGS? The current owner of DOGS wants an alternative valuation, proposing to calculate the terminal value using an EV/EBIT multiple of 12.5 as the exit multiple. Q3: Using this exit multiple, what are the estimates for EV and MVE for DOGS? If negotiations with the owner of DOGS pet stores go well, Austin's Private Equity Group should be able to purchase the company for a reasonable price close to the values above. After the acquisition, Austin's Private Equity Group plans to change the capital structure of DOGS. The managers want to consider two debt financing options: a constant debt level and a constant D/V ratio. For these valuations, use the terminal growth rate of 4% after year 5. Q4: What is the EV of DOGS if the debt level will be $600,000 forever? Q5: What is the EV of DOGS if the D/E ratio is 1.5? Q6: If the management team decides to use a D/E ratio of 1.5, how much debt will the firm have at the end of year 4