need equations for C138 Price & part d! thank you!

Wansley Portal Inc., a large intemet service provider, is evaluating the possible acquisition of Alabama Connections Company (ACC), a regional intemet service provider. Wansley's analysts project the following post merger data for ACC (in thousands of dollars): If the acquisition is made, it will occur on January 1,2019. All cash flows shown in the income statements are assumed to occur at the end of the year. ACC currently has a capital structure of 30 percent dobt, which costs 9 percent, but Wansioy would increase that to 40 percent debt, costing 10 percent if the acquisition were made. ACC, If independent, would pay taxes at 30 percent, but its income would be taxed at 35 percent if it were consolidated. ACC's current market-determined beta is 1.40. The cost of goods sold is expected to be 65 percent of sales, but it could vary somewhat. Gross investment in operating assets is expected to be equal to depreciation-replacing worn out equipment, so net investment in operating assets will be zero. The risk-free rate is 7 percent, and the market risk premium is 6.5 percent. Wansley currently has $400,000 in debt outstanding. ACC's management estimates the firms equity is currently worth $750,000 (pre-merger). Use the compressed APV model to answer the following questions. Step 1: Find the levered cost of equity at old capital structure. 444647rL=16.10% 47 48 Step 2: Find the unlovered cost of equity. 495051rU=13.97%Usethisvalue-youdonotneedtocalculate 51 51 53 54. What is the horizon value of the tax shields ? What is the PV value of ACC's tax shlelds? 30 Points 55 56 Before we can procoed with this problem, we must generate pro forma income statements for ACC's operations after the proposed 57 merger so we can calculate free cash flow and interest tax shields. - In this scenario, we state that investment in net operating capital is zero. This arises from the fact that the only needed investments are those needed to replace wom out capital, and that they equal depreciation. We must determine the tax shields. From this point, we can derive horizon value from the basic DCF framework. The tax shield is the interest multiplied by the post-merger tax rate. Interest Tax shield To calculate the value of the tax shields add the horizon value of the tax shields to the 2023 tax shield to get the total tax shield cash flow in 2023. In the other years the total TS cash flow is just the annual TS Then find the NPV of this stream of tax shields at the unlevered cost of equity. To calculate the unlevered value of operations, add the unlevered horizon value to the free cash flow in 2023 to get the total unlevered cash flow in 2023. In the other years the unlevered cash flow is just the annual free cash flow. The unlevered value of operations is the NPV of the unlevered cash flows at the unlevered cost of equity. The value of operations is the value of the interest tax shleids plus the unlevered value of operations To find the value of ACC to Wansley's shareholders take the value of operations, add in any non-operating assets (there are non for ACC) and subtract off the debt. d. Calculate the gain (per share) to ACC and Wansley at each share price below. Graph the gains to identify the negotiation range (graph the results) 10 points. points)