The first acquisition target is a privately held company in a mature industry. The company currently has free cash flow of $20 million. Its WACC is 10% and it is expected to grow at a constant rate of 5%.The company has marketable securities of $100 million. It is financed with $200 million of debt, $50 million of preferred stock, and $210 million of book equity.
Problem 1: What is its total corporate value?
Problem 2: What is its value of equity?
Problem 3: What is its value of operations?
Problem 4: What is its MVA (MVA =Total corporate value - Total book value)?