Spring 2023. Dallas Corp.s shareholders have voted to refocus the company on its core bolts manufacturing operations. As part of this process, the company is seeking to divest Latch Inc., its latches subsidiary. Dallas Corp. and Paso Corp., a potential acquirer, have agreed on the following projections for Latch Inc. over the next 8 years (2024-2031): Sales in 2024 (first projected year) are expected to be $120.0 million, a 5% growth over the preceding year. 2025-2027: sales are expected to grow at a 6% annual rate during each of these 3 years. 2028-2031: sales are expected to grow at a 3% annual rate during each of these 4 years. EBIT margins over the period will improve from 40% (in 2024) by increment of 0.5% every year until it reaches 43%; it will then remain at this level forever. EBIT is projected to grow by 1.5% per year in perpetuity after 2031 (i.e. in 2032 and thereafter). Annual capital expenditure requirements are assumed to be equal to annual depreciation. Net working capital is forecast as 10% of sales, the same % of sales level as in 2023. The transaction is expected to close on December 31, 2023. It is estimated that Latch Inc.s net debt at the closing date will be $60 million. Assume that Latch has the same business risk as Paso Corp., also a manufacturer of latches, and the same capital structure as Paso Corp., whose WACC is 11%. Yet, Paso Corp. does not expect any synergy from the acquisition. Assume a 25% tax rate.

1. (10 points) Find Latchs equity value at the closing date assuming that all cash flows during any year occur at year-end

2. (4 points) Find Latchs equity value at the closing date assuming that all cash flows during any year are generated mid-year