Consider the following startup company which produces a mobile device. The company needs to purchase two types of inputs. The costs of input A account for 30% of sales input B account for 20% of sales. and the costs of In addition, the following assumptions are made The company sells one million units of the device at tl and X units at t-2. The company sells the device for $10 per unit at tl and t-2 The company only exists for two period (-1,2) and the liquidation (residual) value is zero There is no CAPEX, no depreciation and no changes in working capital The tax rate is 30%. The cost of capital (ie. discount rate) is 40%. (a) Suppose X-2.2 million units at t-2. Determine the operating income (EBIT), net operating income and free cash flow of the company at t l and t-2? [6pl (b) The owner wants to sell the company and hires an investment bank to do a DCF valuation. What is the (DCF-) value of the firm for the seller? [2p] A private equity fund is interested in acquiring this company at t-0. The owner of the company asks for $7 million. The acquisition price of $7 million is paid in cash and fully written o ff in two years in equal amount (linear depreciation) (c) (d) The private equity fund is conducting a sensitivity analysis. Determine the minimum Does the private equity fund buy the company for that price? [8pl units X sold at t2 so that the private equity fund breaks even at the purchase price of $7 million. [4p]