Question: NOTE: X=3 . PUT 3 WHERE YOU SEE X. 3. Victor Hugo, CEO and the owner of the Les Miserables, would like to acquire a

NOTE: X=3 . PUT 3 WHERE YOU SEE X. 3. Victor

NOTE: X=3 . PUT 3 WHERE YOU SEE X.

3. Victor Hugo, CEO and the owner of the Les Miserables, would like to acquire a company with the following information. The company can borrow long term at 1x% and the tax rate is 40%. Market value of debt is $1x0000000 and the market value of equity is $2x0000000. The 10-year T-bond rate is 6% and the historical risk premium is 4%. Beta of the company is estimated as 1.x and the the growth rate of the company is x%. The company has x million shares. FCFFs for the next three years are given below. (Equity market is not in equilibrium.) Year FCF to Firm 1 $12 million 2 $14 million 3 $1x million a. Calculate the WACC. (15 pts) b. Calculate the firm value of the company. (15 pts) c. Calculate the PPS of the company. (5 pts)

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