2. Lockheed reported EBITDA of $1,200 million in 1993, prior to interest expense of $215 million and depreciation charges of $200 million. Capital expenditures in 1993 amounted to $450 million and working capital was 7% of revenue which was $13,500 million. The firms debt outstanding is $3.068 billion (book value) trading at a market value of $3. 2 billion and yielding a pre-tax interest of 8%. There are 62 million shares outstanding trading at $64 per share and the most recent beta is 1.10. The tax rate is 40%. T-bills yield 7%.

The firm expects revenue, capital expenditures, and depreciation to grow at a rate of 9.5% per year from 1994 to 1998, after which growth is expected to drop to 4%. Capital spending will offset depreciation. The corporation also plans to lower its debt-equity ratio to 50%, which will result in the pretax interest rate dropping to 7.5%.

What is the value of the firm?