Consider the situation faced by an analyst working for Morgan Stanley, who has a client interested in acquiring OfficeMart, Inc., a retailer of office products. This client is interested in purchasing the entire firm, which means that it will acquire all its outstanding equity and assume its outstanding debt. Although valuations of company acquisitions can be quite involved, the Morgan Stanley analyst has made a simple "first-pass" analysis of the intrinsic value of OfficeMart using the FTE (Flow to Equity) method using the flowing data. Please show the Calculations.

OfficeMart finances 40% of its assets using debt costing 5%; equity investors in companies like OfficeMart (both in terms of the industry and their capital structures) demand a 14% return on their investment. What value of officeMart do you think the analyst came up with? You must do the valuation for 1 year and ignore terminal value. [10]