You are considering the acquisition of Pioneer Communications. Proforma financial information for Pioneer Communications is below; the appropriate discount rate for Pioneer Communications is 15%. After year 20, you will assume that the cash flow from year 20 will then grow at 3% per year for 5 years. For valuation purposes, you will ignore all cash flows from year 26 and beyond. The tax rate is 40%.

Pioneer Communications Years 1-5 Year 6 Years 7-14 Year 15 Years16-20

Sales 2,000 2,500 2,500 2,500 4,000

Depreciation 20 20 30 30 50

EBIT is assumed to be 60% of Sales.

Interest 60 60 75 70 90

Capital Expenditures 0 800 0 1,000 0

Increases in

Working Capital is 10% of the change in sales; invested the period before the sales increase

Principal Payment 0 0 0 500 0

Using a DCF approach, what is the value for Pioneer Communications? You will assume Pioneer Communications debt if you acquire Pioneer Communications