Consider the following information for the next 8 questions: Valuing a Perpetuity Entity for all Financial Stakeholders Be sure to carefully read the Introduction before starting this problem. Introduction SuperCo (SC) is a profitable, debt-free entity, operating in steady-state forever. Your Equity/Debt investor team is considering buying it and adjusting its capital structure at T=0 (at time of purchase). Your team plans to live forever. The asking price for 100% of the firm's stock is: $200 MM. Your team believes that an optimal capital structure for the firm would be: 40%D/(D+E) If your team proceeds with the SuperCo transaction: - The equity investors will pay (1-D)/(D+E)\% of the purchase price from their own funds. - SuperCo will take out a long-term loan at the moment of close, provided by the debt investors on the team, to pay the current owners the rest of the purchase price. - The equity investors will operate SuperCo in its recapitalized steady-state forever. - The loan will be periodically renewed at the same terms (at the same interest rate) forever. Find: The team's estimate of SuperCo's Enterprise Value The NPV of this project for the Equity/Debt Investing Team. Given Constants \begin{tabular}{llcc} \hlinerRF & 3.00% & 3.00% \\ \hlinerM & 7.00% & 7.00% \\ \hlineU (with no debt) & 0.80 & 0.80 \\ \hlineL & NA & 1.16 \end{tabular} Pp(D+E)=D+E=CAPtot = Market's view of Enterprise Value D/(D+E)=wD D E Key Rates \begin{tabular}{|r|r|} \hline Existing & As Purchased \\ \hline 7.00% & 8.000% \\ 33.00% & 33.000% \\ \hline 6.200% & 7.629% \\ \hline 6.200% & 6.722% \\ \hline \end{tabular} Free Cash Flows F(DCE) \begin{tabular}{l|c|c|} \hline Partial Income Statement, NOPAT and FCFs (\$MM UON) & Existing & As Purchased \\ \hline Revenue & $132.00 & $132.00 \\ \hline - Depreciation & ($45.00) & ($45.00) \\ - Other Expenses & ($60.00) & ($60.00) \\ = EBIT & $27.00 & $27.00 \\ \hline -Tax on EBIT & & 3 \\ \hline = NOPAT & & 4 \\ \hline - Working Capital & & $0.0000 \\ \hline - Depreciation & & $45.0000 \\ - CAPX & & ($45.0000) \\ \hline= FCF & \end{tabular} Valuation at T=0 Valuation What is the absolute value of quantity 3 (shown in a green-background cell)? Question 4 What is quantity 4 (shown in a green-background cell)? Question 5 What is quantity 5 (shown in a green-background cell)? Question 6 What is quantity 6 (shown in a green-background cell)? Question 7 What is quantity 7 (shown in a green-background cell)? Question 8 Based on your answer for quantity 7 , should the team consider going ahead with this project? Choose one answer and one reason. Because the team cannot make a final determination without analyzing out-of-model considerations. Because the NPV>0 Because the NPV