Sangria is tempted to acquire the Rio Corporation, which is also in the business of promoting relaxed, happy lifestyles. Rio has developed a special weight-loss program called the Brazil Diet, based on barbecues, red wine, and sunshine. The firm guarantees that within three months you will have a figure that will allow you to fit right in at Ipanema or Copacabana beach in Rio de Janeiro. But before you head for the beach, youve got the job of working out how much Sangria should pay for Rio. Rio is a U.S. company. It is privately held, so Sangria has no stock-market price to rely on. Rio has 1.56 million shares outstanding and debt with a market and book value of $36.6 million. Rio is in the same line of business as Sangria, so we will assume that it has the same business risk as Sangria and can support the same proportion of debt. Therefore we can use Sangrias WACC. In the year just ended Rio had sales of $84.2 million with cost of goods sold amounting to $63.7 million. Its WACC is 10% with a tax rate of 34% and a long term growth forecast rate of 3.6%. Consider the following additional information. Year Forecast 0 1 2 3 4 5 6 7 Sales growth % 6.7 7.6 7.6 7.6 4.6 4.6 4.6 3.6 Costs (percent of sales) 75.5 74.6 75.1 75.1 75.6 75.6 76.1 76.6 Depreciation 3.9 10.5 11.2 11.9 12.4 12.9 13.3 13.7 Fixed assets investments 11.6 15.2 16.1 17.2 15.6 16.2 16.8 16.50 Working capital investment 1.06 0.56 0.86 0.96 0.56 0.66 0.66 0.46

a. Calculate the present value of the cash flows in years 1 to 7. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value of the cash flow $ ____

b. Estimate the horizon value using the constant-growth DCF formula. (Do not discount this horizon value into present value terms. Do not round intermediate calculations. Round your answer to 2 decimal places.) Horizon value $ _________

c. Calculate the present value of the company. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value of the company $ ________

d. Calculate the total value of the equity. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Total value of the equity $ _______

e. Calculate the value per share. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value per share $______