Part 4: Hypothetical situation - Acquisition

Surprisingly, when I asked you Should I invest in Dollar Tree? in part 3, I was not talking about buying a few stocks of Dollar Tree. Rather, I want to buy the whole company ! I personally predict that Dollar Tree can grow fast for the next 5 years only, and then after that, the company will grow really slow. Below are my personal estimation/expectation for Dollar Tree performance in the next 5 years (all numbers are in millions)

	2024	2025	2026	2027	2028
EBIT	$2,173	$2,608	$3,129	$3,755	$4,506
Depreciation	$706	$741	$778	$817	$858
Capital expenditure	$1,100	$1,210	$1,331	$1,464	$1,611
Investment in working capital	$60	$72	$86	$104	$124

Below is the additional info that I estimate:

• Tax rate = 30%
• Weighted-average cost of capital = 15%
• Growth rate after 5 years = 5%

Knowing that you have already taken the Financial Statement Analysis class, I ask for your assistance in this deal. If I want to send the offer to Dollar Tree by the end of this year, how much should be the price that I offer? In other words, what is the value (FMV) of the firm from my personal estimation above. Please use the Discounted Free Cash flow valuation method to estimate Dollar Tree value, with Perpetual Growth method to estimate the terminal value.

For this question, please show step-by-step calculation. If you use Excel, please carefully document your Excel formula.