You are an Investment Banker with the firm of Emerson, Lake and Palmer, LLC and you're working on a leveraged acquisition being considered by your client, Allison Chains, Inc. You've received financial information and projections from the target company and you begin the preparation of you DCF valuation model. You know that your Managing Director at Emerson, Lake and Palmer, LLC will want to present two general forms of analysis to the Allison Chains, Inc. board of directors. No discount rate is given. Do not need to calculate IRR.

Calculate the cash flows necessary to complete a DCF valuing the entire company for the purpose of setting a bid price for the acquisition. Also, calculate the cash flows that would be relevant for an IRR computation regarding the equity investment being made.

1. Provide a valuation of the entire business enterprise based on a projection of free cash flow
2. provide an IRR analysis of the specific investment returns in the form of Net cash flow that Allison Chains, Inc. will earn on the equity portion of the target company.

Free Cash Flow= 7,560

Net Cash Flow= 5,100

Earnings before Interest, Taxes, Depr. and Amort. Amortization Expense Depreciation Expense Earnings Before Interest and Taxes Interest Expense Income Before taxes Provision for Taxes Net income Year 1 $ 15,000 $ 0 $ 3,000 $ 12,000 $ 2,000 $ 10,000 $ 2,700 $ 7,300 Other data Dividends Paid Required Change in New Working Capital Capital Expenditures Net Debt Principal Payments $ 0 ($ 1,000) ($ 3,200) ($ 1,000)