Introduction GreatStringMakers Inc. (GS) is a profitable entity, operating in steady-state forever. Your PE firm is considering buying it (100% of its stock), at the asking price of: $90.00 MM. Your firm believes that GS is already operating at its optimum cap structure of: 40.000% D/(D+E). If your firm buys GS: - You will operate the firm in steady-state forever. - You will not have to refinance the exisiting debt. IE: all you have to do is buy 100% of the firm's shares of stock. Financing Structure D/(D+E) = WD WE E D+E = CAP Tot D 40.000% 60.000% $90.00 $150.00 $60.00 7.000% 32.000% 11.592% Key Rates To (pretax) Income Tax rate TE Income Statement Revenue - Depreciation Other Expenses -Interest =EBT Tax As Purchased $100.0000 ($30.0000) ? You don't need this to solve this problem 1 Assume this number is correct. $15.8000 2 NI You have to calculate this number Valuation at TEO 3 Valuation FCF PVE NPV 4 Annual FCF to owners. PV of all future FCFs from firm to owners. NPV of project, "buy the firm and enjoy its free cash flows forever." 5 U 0318 15 What is the absolute value of quantity 2? Dal 19 15 What is quantity 32 20 15 What is quantity 5? 021 13 What is quantity 4? on 22 150 What is the absolute value of quantity 12