Part $2$

In November of $1988,$ KKR$,$ an investment firm, won a bidding war to buy all of the shares $(250\mathrm{.}612$ million$)$ of RJR Nabisco

for $$108$ per share. RJR shares had been trading for $$55$ prior to the buyout. The purchase was debt financed $($$$27\mathrm{.}06609$

billion$).$ The new debt was added to the $$3\mathrm{.}70968$ billion of debt that predated the buyout. The new debt resulted in a debt$-$

to$-$value ratio of $83\mathrm{.}467\%$ which RJR was committed to maintaining in perpetuity. Analysts expected RJR to generate free

cash flow of $$1\mathrm{.}35$ billion at the end of $1989.$ Assume that cash flows occur on December $31$ and today is January $1,1989.$

Analysts expected RJR$\text{'}$s cash flow to grow at $5\%$ in perpetuity. RJR$\text{'}$s cost of debt was $10\%$ and its cost of unlevered equity

was $12\%.$ The tax rate was $40\%.$

What was the value of KKR$\text{'}$s equity in the company after the buyout $($on January $1,1989)?$ Express your answer in billions of

dollars rounded to one decimal place.

$ BIn November of $1988,$KKR $,$an investment firm, won a bidding war to buy all of the shares $(250.612$million $)$of RJR Nabisco for $ $108$per share. RJR shares had been trading for $ $55$prior to the buyout. The purchase was debt financed $($ $ $27.06609$billion $).$The new debt was added to the $ $3.08715$billion of debt that predated the buyout. The new debt resulted in a debt $-$ to $-$ value ratio of $84.90\%$which RJR was committed to maintaining in perpetuity. Analysts expected RJR to generate free cash flow of $ $1.28$billion at the end of $1989.$Assume that cash flows occur on December $31$and today is January $1,1989.$Analysts expected RJR $$ s cash flow to grow at $6\%$in perpetuity. RJR $$ s cost of debt was $10\%$and its cost of unlevered equity was $13\%.$The tax rate was $40\%.$ What was the value of KKR $$ s equity in the company after the buyout $($ on January $1,1989)?$Express your answer in billions of dollars rounded to one decimal place.