Diebold Incorporated

Diebold Incorporated manufactures, markets, and services automated teller machines in the United States. The following are selected numbers from the financial statements for Year 1 and Year 2 (in millions):

Year 1 Year 2

Revenues $ 544.0 $ 620.0

Operating Expenses (465.1) (528.5)

Depreciation (12.5) (14.0)

= Earnings before Interest and Taxes 66.4 77.5

Interest Expenses 0.0 0.0

Taxes (25.3) (29.5)

= Net Income $ 41.1 $ 48.0

Working Capital $ 175.0 $ 240.0

The firm had capital expenditures of $15 million in Year 1 and $18 million in Year 2. The working capital in Year 0 was $180 million. In Year 3 and into the future, the firm expects $40 million in free cash flows. Its WACC is 7.5 percent and expected growth rate is 2.5 percent.

What is the market value of equity? Explain any assumptions.