My personal answer:

(1) 2656.4 million

(2) 3029.3 million

(3) 11.3%

If there's something wrong with my answer, please point it out. Thanks!

5. KD Industries is expected to generate free cash flow of $200 million next year. Since next year, the free cash flow is expected to grow at a stable rate of 6% for the first 10 years and then grow 3% forever. It has $0 million cash in the bank now. The firm currently uses 100% equity, and its cost of equity is 12%. It pays a 35% corporate tax rate. What is the Gartner's firm's expected free cash flow in year 1? (1) What is the firm value now? (2) The firm's management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. The cost of debt will be 5%. After the recapitalization, what should be the firm value? (3) Assume that the firm's management is also considering another recapitalization plan, which is the borrow money to maintain a constant debt to equity ratio of 0.75. What is the firm after-tax WACC after the recapitalization? The cost of debt will be 5%