Athena, LLP is a private equity fund located in Brookline, MA. The firm is considering acquiring a 25 percent stake in Princess Leia, Inc., a large private company headquartered in Orlando, Florida. As part of the process of evaluating the acquisition, your boss at Athena has asked you to perform a valuation of Princess Leia, Inc. You have collected the following abbreviated financial statements data to help you with your analysis. All dollar amounts are in millions. General and administrative expenses include $48.50 million and $27.50 million in stock-based compensation for 2019 and 2018, respectively. Princess Leia's free cash flows are expected to grow at the rate of 30% per year from 2019 to 2022, but the growth rate is expected to decline steadily each year after 2022 to a stable growth rate of 3% per year by 2032. The company's cost of capital is 18% and its combined marginal tax rate is 25%. Since Princess Leia is a private company, you understand that an illiquidity discount is necessary and have estimated that a discount of 30% is appropriate. Athena typically applies a 15% minority discount to acquisitions of a non-controlling stake in private companies. What is the maximum amount Athena can offer for the 25 percent stake in Princess Leia? Assume that the long-term debt has a market value of $308 million as of the end of fiscal year (FY) 2019.[25 points]

FY 2019

FY 2018

Income statement excerpts:

Net sales

10,995

9,379

Cost of sales

7,809

6,556

Gross profit

3,186

2,823

Operating expenses:

Distribution and marketing

1,093

1,048

Technology and content

362

262

General and administrative

161

138

Other operating expenses

49

12

Total operating expenses

1,665

1,460

Income from operations

1,521

1,363

Balance sheet excerpts:

Current assets:

Cash and cash equivalents

1,658

1,365

Marketable securities

808

683

Inventories

1,053

685

Accounts receivable (net)

484

406

Deferred taxes

133

100

Total current assets

4,136

3,239

Fixed assets, net

755

517

Deferred taxes

68

70

Intangible assets

721

401

Total assets

5,680

4,227

Current liabilities:

Accounts payable

2,079

1,701

Notes payable

59

49

Accrued expenses and others

862

546

Deferred revenue

62

58

Total current liabilities

3,062

2,354

Long-term debt

254

198

Post-employment obligations

415

240

Deferred revenue

122

100

Stockholders' equity

1,827

1,335

Total liabilities and stockholders' equity

5,680

4,227