Marston Marble Corporation is considering a merger with the Conroy Concrete Company. If the acquisition were made, Marston would operate Conroy as a separate, wholly-owned subsidiary. Marston would pay taxes on a consolidated basis, at its current effective tax rate of 25%.

Marston Marbles Acquisition Department estimates that Conroy Concrete, if acquired, would generate the following free cash flows and Interest Expense (in millions of dollars) in Years 15:

Year	Free Cash Flow	Interest Expense
1	$1.30 million	$1.2 million
2	$1.50 million	$1.7 million
3	$1.75 million	$2.8 million
4	$2.00 million	$2.1 million
5	$2.12 million	$2.1 million

The cash flows listed in the above table include all acquisition effects. In the years following Year 5, both Interest Expense and the free cash flows are projected to grow at a constant annual rate of 6%. A discount rate or cost of capital of 10% would apply to this acquisition.

The cash flows listed in the above table include all acquisition effects. In the years following Year 5, both Interest Expense and the free cash flows are projected to grow at a constant annual rate of 6%. A discount rate or cost of capital of 10% would apply to this acquisition.

Calculate the Horizon Value (HV) as of the end of Year Five for Conroy Concrete Corporations expected Free Cash Flows that will occur after that date.

What is the present value of the expected Free Cash Flows that Conroy Concrete Corporation is projected to generate, including the Horizon Value, given the assumptions outlined above?

Calculate the tax-shield benefit that Marston Marble will realize each year in Years 15, due to the tax-deductibility of Conroy Concretes Interest Expense on its Consolidated Income Statement.

Calculate the Horizon Value (HV) as of the end of Year Five for Conroy Concrete Corporations expected Interest Expense tax-shield benefit that will occur after that date.

What is the present value of the expected Interest Expense tax shield benefit that Conroy Concrete Corporation is projected to generate, including the Horizon Value of this tax shield benefit, given the assumptions outlined above?

Calculate the total Present Value of Conroy Concretes free cash flows (calculated in Question #2) and the Interest Expense tax shield benefit (calculated in Question #5) that Marston Marble will realize if this acquisition is made.

If Conroy Concrete has $10 million in debt outstanding, how much would Marston Marble then be willing to pay for Conroy (i.e., Conroys Net Asset Value)?