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You are evaluating a potential takeover target. A junior analyst on your team provided the target FCFF forecast below. In addition, you have information about

You are evaluating a potential takeover target. A junior analyst on your team provided the target FCFF forecast below.
In addition, you have information about the target's debt, interest expenses, tax rate, and unlevered cost of equity.
Estimate the target firm's value based on its free cash flows and interest tax shield (i.e. use compressed APV method)
Estimate the target's total equity value
Estimate the target's per-share value
As an analyst for the acquirer, what's the maximum you would recommend paying for the target on a per-share basis?
Year 0(most recently)12345
FCFF 8.07.49.912.113.5(in millions)
Interest expense 2.02.42.62.93.2
28% Tax rate 12 million shares outstanding
9.0% rE,U 40.0 Pre-merger debt (millions)
3.0% Long-run growth rate 0.0 Excess cash (millions)

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