Chiara Companys projections are shown in the Table bellow. Use this table as a starting point to value the company as a whole. The long-run growth rate after year 5 is 4%. The company has $5 million debt and 865,000 shares outstanding. We decided to make on offer for Chiara.

If successful, we plan to finance the purchase with an additional $7 million of 7% debt. We intend to pay this debt down to $9,4 million in year 5, when the Company returns to the same capital structure as today: 32% Debt.

Using APV Adjusted Present Value Method, calculate what is the maximum we could pay for Chiara Company

Year 5 Historical Forecast -2 -1 0 1 | 2 | 3 4 35,348 39,357 40,123 36,351 30,155 28,345 29,982 17,834 18,564 22,879 21,678 17,560 16,459 15,631 1.Sales 30,450 2.Cost of goods sold 14,987 3. Other costs 6,968 7,645 8,025 6,797 5,078 4,678 4,987 5,134 7,876 7,517 7,208 9,364 10,329 5,671 5,890 5,670 5,908 6,107 5,908 1,986 1,847 1,300 3,257 4,421 4. EBITDA (1 - 2 - 3) 10,546 13,148 9,219 5. Depreciation 5,745 5,678 6. EBIT (Pretx profit) (4 - 5) 4,875 7,403 3,541 7. Tax at 28% 1,365 2,073 991 8. Profit after tax (6-7) 3,510 5,330 2,550 9. Change in working capital 325 566 784 10. Investment (change in gross fixed assets) 5,235 6,467 6,547 Cash flow projections for Chiara Corp ($ thousands) 556 517 364 912 1,238 1,430 -54 1,330 -342 936 -245 2,345 127 3,183 235 7,345 5,398 5,470 6,420 6,598 Additional Information Debt Interest @7% 12,000 11,480 10,960 10,440 9,920 9,400 840 804 767 731 694 BE = 1,37 F = 5% M = 12,5% rp = 7% TC = .28 D/D+E = .32 Year 5 Historical Forecast -2 -1 0 1 | 2 | 3 4 35,348 39,357 40,123 36,351 30,155 28,345 29,982 17,834 18,564 22,879 21,678 17,560 16,459 15,631 1.Sales 30,450 2.Cost of goods sold 14,987 3. Other costs 6,968 7,645 8,025 6,797 5,078 4,678 4,987 5,134 7,876 7,517 7,208 9,364 10,329 5,671 5,890 5,670 5,908 6,107 5,908 1,986 1,847 1,300 3,257 4,421 4. EBITDA (1 - 2 - 3) 10,546 13,148 9,219 5. Depreciation 5,745 5,678 6. EBIT (Pretx profit) (4 - 5) 4,875 7,403 3,541 7. Tax at 28% 1,365 2,073 991 8. Profit after tax (6-7) 3,510 5,330 2,550 9. Change in working capital 325 566 784 10. Investment (change in gross fixed assets) 5,235 6,467 6,547 Cash flow projections for Chiara Corp ($ thousands) 556 517 364 912 1,238 1,430 -54 1,330 -342 936 -245 2,345 127 3,183 235 7,345 5,398 5,470 6,420 6,598 Additional Information Debt Interest @7% 12,000 11,480 10,960 10,440 9,920 9,400 840 804 767 731 694 BE = 1,37 F = 5% M = 12,5% rp = 7% TC = .28 D/D+E = .32