Firm A has a random earning stream before interest and tax starting from next year (Year 1) at $100 Million (indefinitely constant ). Firm A is all-equity financed with an equity beta of 1.25. The risk-free rate is 5%, the risk premium is 8%, corporate tax is 40%. "A" is to partner with private equity fund "B" to acquire the company in an LBO. "B" is considering buying A with a 20% premium over its current equity value. B is expected to make A productive with 5% annual expected growth indefinitely. B is considering financing the acquisition with 80% debt and 20% equity. B will provide 80% of the equity while 20% will be provided by management. The firm will borrow at the risk-free rate and market interest payment for 3 years (year1-year3) but not pay back any principal. By the end of year3, A will be sold with outstanding debt paid.

To estimate selling price, B is considering a few approaches:

"C" is publicly traded in the same industry with a similar risk profile as A. Its enterprise value is $600milliuon with an EBIT of $80million.

Questions:

What is A's value before the acquisition and the value that B is offering A's shareholders for the acquisition? What price does B plan to sell A at the end of year 3?