Gretsch Industries is considering acquiring Flueger Systems. Although Flueger has said it is not for sale, Gretsch is considering a hostile takeover by making a trade offer directly to Flueger's shareholders. Meghan Doyle, a financial analyst with Gretsch has been assigned a task of estimating a fair acquisition price for the tender offer. Doyle plans to use three different valuation methods to estimate the acquisition price and has collected the necessary financial data for this purpose.

Flueger Systems has 20 million shares outstanding. Doyle has estimated that at the end of each of the next four years, Flueger will have free cash flow to equity (FCFE) (in millions) of $24, $27, $32 and $36. After the 4^th year Doyle expects Flueger's FCFE to grow at a constant rate of 6% per year. She also determines that Flueger's cost of equity 10.5% is the appropriate discount rate to use for the analysis.

Doyle has also found three companies that are the in the same industry as Flueger and has a similar capital structure - Behar Corporation, Walters Inc., and HauelBack Dynamics. In addition Doyle has identified data for three takeover transactions with characteristics Similar to Flueger-Bullseye, Dart industries, and Arrow Corp. Data for both sets of firms are shown in the following figure.