Suppose you are working in the business development group of a large technology

firm or a fashion conglomerate and are asked to value a firm in the context of an acquisition $.$ You have collected the following information:

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With thus information, please answer the following questions.

$1)$ Determine the current cost of capital $($WACC$)$ of the firm. Show all your

calculations.

$2)$ Explain the determinants of the current equity beta of the target company.

$3)$ Determine the relevant cash flows for a valuation of the firm for each of the next

$5$ years.

$4)$ The firm is expected to generate an operating profit $($EBIT$)$ of $$400$ million next

year. The operating profit will grow by $50\%$ per year for four years thereafter.

The investment $($change$)$ in operating NWC equals $$120$ million next year, and

increases by $$20$ million in each of the four years thereafter.

The net capital expenditures are equal to $$100$ million next year, and increase by $$50$

million in each of the four years thereafter.

After year $5,$ the firm is expected to be mature and grow its cash flows at $3\%$

indefinitely.

The marginal corporate tax rate of the firm is $40\%$

The firm has $125$ million shares outstanding and has a debt ratio of $25\%$ in market value

terms. The firm has a bond rating of BBB and its equity beta equals $1\mathrm{.}55.$ The interest

rate on T$-$Bonds equals $2\%,$ the yield on BBB$-$rated bonds is $3\mathrm{.}5\%,$ and the market risk

premium is $6\%.$ Finally, you can assume that all cash flows will be realized at the end of

the year. With thus information, please answer the following questions.What is the value per share for this firm? Motivate your approach and show your

calculations.