Its projected profit and loss statements and retention requirements are shown below (in millions):

Year 1 Year2 Year 3 Year 4 Year 5

Net revenues $225.0 $240.0 $250.0 $260.0 $275.0

Cash expenses $200.0 $205.0 $210.0 $215.0 $225.0

Depreciation $11.0 $12.0 $13.0 $14.0 $15.0

Earnings before

interest and taxes $14.0 $23.0 $27.0 $31.0 $35.0

Interest $8.0 $9.0 $9.0 $10.0 $10.0

Earnings before taxes$6.0 $14.0 $18.0 $21.0 $25.0

Taxes (40 percent) $2.4 $5.6 $7.2 $8.4 $10.0

Net profit $3.6 $8.4 $10.8 $12.6 $15.0

Estimated retentions $10.0 $10.0 $10.0 $10.0 $10.0

Briarwood's cost of equity is 16 %, its cost of debt is 10 %, and its optimal capital

structure is 40 % debt and 60 % equity. The best estimate for Briarwood's long-term

growth rate is 4 %. Furthermore, the hospital currently has $80 million in debt outstanding.

a.I need the equity value of the hospital using the free operating cash flow (FOCF) method. Please show calculations.

b. The expected long-term growth rate was 6 %.I need the impact/change

that would have on the equity value of the business according to the FOCF method.

I need the growth rate if it were only 2 %. Please show calculations.