Sallie's Sandwiches

Sallie's Sandwiches is financed using 20% debt at a cost of 8%. Sallie projects combined free cash flows and interest tax savings of $2 million in Year 1, $4 million in Year 2, $5 million in Year 3, and $117 million in Year 4. (The Year 4 value includes the combined horizon values of FCF and tax shields.) All cash flows are expected to grow at a 3% constant rate after Year 4. Sallie's beta is 2.0, and its tax rate is 34%. The risk-free rate is 8%, and the market risk premium is 4%.

Using the data for Sallie's Sandwiches and the compressed adjusted present value model, what is the total value (in millions)?

	a.	$72.37
	b.	$75.81
	c.	$74.49
	d.	$76.45
	e.	$73.99