Laika has been working on advanced media tracking technology, which will be available for commercialization in a short period. If they don't invest in the project, they expect to grow at a 4 percent rate in perpetuity, starting from year-end T1 forward. It pays out all earnings as dividends. Their forecast of next year's revenues are $12.25 million; and operating cash flows after tax are forecast at $3.67m. If they invest in a new product line, they anticipate the first after tax operating cash flow from the technology to be $4.55 million, received one year from today. Market demand is expected to result in operating cash flow growth of 25% and 20% rate, respectively, in the next two years after that. Thereafter, competitive pressures are expected to reduce long run growth to 4 percent growth, in perpetuity. Laika expects to invest $65.15 million in the venture immediately to secure these future cash flows. Net working capital spending is estimated at 7% of operating cash flows. Laika has a YTM on its interest bearing debt of 6.5%; Laika does not have a reliable beta, but it knows that firms in this industry have asset betas averaging 1.40. Market conditions are such that the risk free rate is 3.5% and the market risk premium is 5.0%. The company has $35 million in debt and a market value of equity of $85 million. It has 3.0 million shares outstanding and faces a tax rate of 21%. Show all steps and inputs to your final answer. If needed, use the non-tax version of beta (ie Asset beta = Bequity/(1+D/E)). Place you answers here. Show your work below, organized by question. a. What is the discount rate that should be used for the valuation? Discount rate= b. What is the value of the company WITHOUT the project? The price per share? Assume all cash flows are received at year's end. Firm Value w/o pjt = Price per share = c. What is the value of the project as a Stand Alone in total? Project Value = What is the value of the project investment on a per-share basis? Project Value Per Share = d. What is the new price per share of Laika if they undertake the investment? What is your recommendation regarding the proposed investment - accept or reject? Laika price per share w/ pjt = Accept or Reject? Explain. Part A - Discount Rate? Part B - Value per Share, wlo investment? Part C - Project Value? Timeline: 0 1 2 3 4 ..to infinity Part D - Laika - Value with the Project? Should the project be accepted or rejected? Explain