Stan Mikita's Donuts (SMD) is a publicly traded firm, and is a potential LBO target SMD' s equity is $350 million, debt is $70 million, and annual cash flow is $75 million. The Kramerica World Horizons Fund offers $500 million to purchase the equity of SMD, and to pay off its outstanding debt at face value Kramerica finances this $500 LBO issuing $450 million in debt and $50 million in equityAfter the buyout, SMD' s after-tax cash flow from perations improvesfrom $75 million to $90 million per year due to operating efficiencies. a. Calculate the premium that Kramerica is offering to tSMD shareholders b. Assuming that SMD does not pay dividends and the cash flow from operations is directed to pay down the debt that was used to finance the acquisition by Kramerica, how many years would Kramerica have to wait so that it can own SMD fully? (Assume debt has a 0% annual interest rate.) c. After year five, and assuming a forward looking long-term growth rate of 4% annually with a discount rate of 14%, calculate the value of SMD in five years using the constant dividend growth model. d. Calculate the annual total return on the investment for the LBO transaction e. Suppose now that the discount rate used at the end of five years is 20%, and everything else remains the same. What is the t tal annual return on the investment for the LBO transaction? f. Now assume that the discount changes to 15% and the growth rate is 3% at the end of 15 years. What is the total annual return? g. Finally, assume that the discount rate is 14% and the growth rate is 48, but that the investment requires six years to exit. What is the total annual return? Stan Mikita's Donuts (SMD) is a publicly traded firm, and is a potential LBO target SMD' s equity is $350 million, debt is $70 million, and annual cash flow is $75 million. The Kramerica World Horizons Fund offers $500 million to purchase the equity of SMD, and to pay off its outstanding debt at face value Kramerica finances this $500 LBO issuing $450 million in debt and $50 million in equityAfter the buyout, SMD' s after-tax cash flow from perations improvesfrom $75 million to $90 million per year due to operating efficiencies. a. Calculate the premium that Kramerica is offering to tSMD shareholders b. Assuming that SMD does not pay dividends and the cash flow from operations is directed to pay down the debt that was used to finance the acquisition by Kramerica, how many years would Kramerica have to wait so that it can own SMD fully? (Assume debt has a 0% annual interest rate.) c. After year five, and assuming a forward looking long-term growth rate of 4% annually with a discount rate of 14%, calculate the value of SMD in five years using the constant dividend growth model. d. Calculate the annual total return on the investment for the LBO transaction e. Suppose now that the discount rate used at the end of five years is 20%, and everything else remains the same. What is the t tal annual return on the investment for the LBO transaction? f. Now assume that the discount changes to 15% and the growth rate is 3% at the end of 15 years. What is the total annual return? g. Finally, assume that the discount rate is 14% and the growth rate is 48, but that the investment requires six years to exit. What is the total annual return