Part $2$

What is the total value of the company $($in $ million$)?$

Part $3$

What is the value per share of common stock $($in $ $)?$ Assume the company has no excess cash.Intro

It is December $2024.$ You work as a financial analyst for Merck & Co$.$ and are tasked with the due diligence on the

proposed acquisition of a biotech startup. You estimated the following cash flows for the startup:

After $2029,$ cash flows are expected to grow by $4\%$ per year. Based on the riskiness of your industry, you think that

your weighted average cost of capital is $18\%.$

The biotech firm has $5$ million shares and bonds worth $$120$ million outstanding.

Part $1$

What is the horizon value, i$.$e$.,$ the present value of all free cash flows from $2030$ to infinity expressed in $2029-$

dollars $($in $ million$)?$