Answer all questions and show necessary work. Please be brief. This is an open books, open notes exam. 1. Jenway, a publicly traded entertainment company is considering an acquisition of MZ Enterprises, a technology company. MZ Enterprises is a mature company and you have been provided the following estimate for expected cash flows next year for the company: MZ Enterprises - Next year (in millions) Taxable income $350 - Taxes $105 + Depreciation $105 - Cap Ex $130 + Debt Issued $130 -Debt Repaid $100 Cash Flow $250 The table below gives costs of equity and capital for Jenway, MZ Enterprises and the combined company: Jenway MZ Enterprises Merged firm Cost of equity 8.00% 10.00% 8.75% Cost of capital 7.00% 8.50% 7.50% Estimate how much value you would attach to the expected cash flows in the table, if you expect them to grow 2.0% a year forever. (2 points)