Assume the following post-acquisition yearly free cash flows and interest expense (in millions of dollars). Assume that the tax rate is 40% and the horizon growth rate is 6%.
2017 2018 2019 2020 2021
FCF 11.70 10.50 16.50 20.70 21.94
Interest Expense 5.00 6.50 6.50 7.00 8.16
Target’s data are: rRF = 7%; RPM = 4%, beta = 1.3, wd =30%, rd = 9%. Assume that the target has $50 million in debt.
What is the equity value of the target to the acquirer?
$216.12
$316.20
$366.18
$416.46