Please show computations in excel

1. Red Valley Brewers is considering an acquisition of Flagg Market. Flagg currently has a cost of equity of 10%; 25% of its financing in the form of 6% debt, and the rest is common equity. Its federal-plus-state tax rate is 40%. After an acquisition, Red Valley expects Flagg to have the FCF and interest payments for the next 3 years (in millions) shown in the following table. After the explicit forecast period, the free cash flows are expected to grow at a constant 5%, and the capital structure will stabilize at 35% debt with an interest rate of 7%. Use the compressed adjusted present value approach to answer the following questions.

Year 1 Year 2 Year3

FCF $10.00 $20.00 $25.00

Interest Expense 28.00 24.00 20.28

What is Flaggs unleverred cost equity? What are its levered cost costs of equity and cost of capital for the post-horizon period?

What is Flaggs value of operations to Red valley?

2. Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure costing 30% debt, its beta is 1.4 (given its target capital structure) Vandall has $10.82 million in debt that trades at par and pay 8% interest rate. Vandells free cash flow (FLF) is 2 million per year and its expected to grow at a constant rate of 5% a year. Vandells pays 40% combined federal and state tax rate. The risk-free tax rate of interest is 5% and the market risk premium is 6%. Hastings first step is to estimate the current intrinsic value of Vandells.

What are Vandells cost of equity and weighted average cost of capital?

What is Vandalls intrinsic value of operation?

What is the current intrinsic value of Vandalls stock?