Firm A has a random earning stream before interest and tax starting from next year (Year 1) at $100 Million (indefinitely constant ). It's all-equity financed with an equity beta of 1.25. risk-free rate=5%, risk premium= 8%, corporate tax =40%.

PE fund "B" is buying A with a 20% premium over its current equity value. "A" will have a 5% annual expected growth indefinitely after the acquisition. The acquisition is 80% debt and 20% equity. B will provide 80% of the equity while 20% will be provided by management. The firm will borrow at the risk-free rate and market interest payment for 3 years (year1-year3) but not pay back any principal. By the end of year 3, "A" will be sold without outstanding debt. To estimate selling price: Firm "C" is publicly traded in the same industry with a similar risk profile as A. Its enterprise value is $600milliuon with an EBIT of $80million.

1. What is A's value before the acquisition and the value that B is offering A's shareholders for the acquisition?

2. What price does B plan to sell A at the end of year 3?