b$.$ Estimate free cash flows for each year $1980-1989.$

c$.$ Estimate the free cash flows in $1990.$ This will include the free cash flow from operating the plant in $1990$ and the cash flow consequences of shutting down the plant at the end of the year. Assume account receivables will be liquidated at $100\%$ of its $1990$ book value, inventory at $75\%$ of its $1990$ book value$2$ and PP&E at $0\%.$ Treat the tax consequences of book losses of the liquidation of all these assets in the same way we treat book losses of PP&E so that any book losses $($i$.$e$.$ the difference between liquidation value and book value$)$ can be used to lower taxable income$3.$ Assume that Dixon will have enough taxable income and capital gains from its other operations so that the tax benefits of the book losses on all assets can be used right away in $1990$ at the $48\%$ tax rate. Assume that accounts payable will be paid in full in $1990.$

d$.$ Estimate Dixon$$s opportunity cost of capital for acquiring the Collinsville plant? Assume management$$s target debt ratio $($i$.$e$.$ ND$/($ND$+$E$))$ for the Collinsville plant is $15\%.$ Use this ratio for your WACC calculation. Disregard the information on the second last paragraph about the proposed financing of the deal. For the cost of debt use $11\mathrm{.}25\%($we will discuss this number in class$).$ Information on potential comparable firms is provided in Exhibits $1,2$ and $5.$ You should choose which firms to use and justify your choice. $4$ Footnote $2$ of the case reading provides information regarding the yield curve. Within that footnote, $$Short$-$Term$$ refers to a $1-$year yield and $$Long$-$Term$$ refers to a $10-$year yield.