Valuation of the target company is a critical aspect of a merger transaction. Different methods are used in acquisition, valuations such as the corporate valuation method, the adjusted present value approach, the free cash flow to equity approach, and so on.

Demo You Inc. is expected to generate a free cash flow (FCF) of $185.00 million this year (FCF1FCF1= $185.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years (FCF2FCF2 and FCF3FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever (FCF4FCF4). Demo You Inc.'s weighted average cost of capital (WACC) is 7.38%.

	You would discount the FCFs using the in your valuation.
	The horizon value of Demo You Inc.'s cash flows is . (Note: Round your intermediate calculations to two decimal places.)
	The current total firm value of Demo You Inc. operations is . (Note: Do not round your intermediate calculations.)

If Demo You Inc. carries $3,808 million of debt before the merger, and the firm has no nonoperating assets or preferred stock, the value of equity of Demo You Inc. to Ziffy Corp. will be

$2,339.48 million.

$3,807.84 million.

$1,268.84 million.

$1,118.84 million.