KKR is contemplating a leveraged buyout of the Hershey Co (HSY). HSYs 220 million shares currently trade at $43/share, and the company has $2 billion in long-term debt. KKR is offering $7/share premium to existing shareholders and plans to finance the buyout using $7.5 billion of debt with an interest cost of 11%, $3 billion of equity financing, and $500 million of HSYs own cash. If the buyout succeeds, the total interest expenses and FCFs (in billions) for HSY over the next three years will be those given below. KKR plans to sell HSY after 3 years (t=3), and anticipates the new owners will maintain a target D/V ratio of 0.5, that HSYs cost of debt will drop to 9%, and that FCFs will be $2 billion a year for the new owners. In your below analysis of this LBO, you should assume that HSYs unlevered cost of equity, ra, equals 12% and use the Miles-Ezzell WACC. You should also assume that HSY generates enough pre-tax cash flows such that the full interest expenses can be used to generate tax shields, and the corporate tax rate is 35%. What is the value of the unlevered firm?

Year	1	2	3
Interest expense (without LBO)	0.4	0.4	0.4
Interest expense (with LBO)	1.3	1.3	1.3
FCF (with LBO)	1.5	1.7	1.9