Question $2(1$ point$)$

Firm $A$ is evaluating the potential acquisition of Firm B$.$ Evaluation will be based on the capital structure and synergies expected after the acquisition. Firm B will have expected free cash flow of $5$ million, $3$ million and $6$ million in Year $1,$ Year $2,$ and Year $3$ respectively. After $3$ years, firm $B$ is growing at $6\%$ growth rate.

Unlevered cost of equity is $10\%$ and tax rate is $40\%.$

Using API$/$ model, what is the unlevered firm value of Firm B$?$

$$111$

$$131$

$$150$

$$120$