Help! I need to find the value of equity using the APV method

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 A B C D E F G H I Wansley Portal Inc., a large Internet service provider, is evaluating the possible acquisition of Alabama Connections Company (ACC), a regional Internet service provider. Wansley's analysts project the following post merger data for ACC (in thousands of dollars): 2015 Net sales Selling and administrative expense Interest 2016 $500 60 30 2017 $600 70 40 2018 $700 80 45 2019 $760 90 60 2020 $806 96 74 All cash flows shown in the income statements are assumed to occur at the end of the year. ACC currently has a capital structure of 30 percent debt, which costs 9 percent. ACC, if independent, would pay taxes at 30 percent, but its income would be taxed at 35 percent if it were consolidated. ACC's current market-determined beta is 1.40. The cost of goods sold including depreciation is expected to be 65 percent of sales. Gross investment in operating assets is expected to be equal to depreciation--replacing worn out equipment, so net investment in operating assets will be zero. The risk-free rate is 7 percent, and the market risk premium is 6.5 percent. ACC currently has $400,000 in debt outstanding. ACC has no short-term investment. Terminal growth rate of free cash flow is 6%. Tax rate of ACC before the merger Tax rate after merger Cost of goods sold as a % of sales Debt ratio (percent financed with debt) before the merger Cost of debt before merger Beta of ACC Risk-free rate Market risk premium Terminal growth rate of free cash flow Pre-merger debt (in thousands) What is the equity value of the ACC to Wansley (Note use APV method)? $ 30% 35% 65% 30% 9% 1.40 7% 6.5% 6.0% 400