Question: Q2 You are evaluating a potential takeover target. A junior analyst on your team p In addition, you have information about the target's debt, interest

Q2 You are evaluating a potential takeover target. A junior analyst on your team p In addition, you have information about the target's debt, interest expenses, tax a Estimate the target's firm value based on its free cash flows and interest tax sh b Estimate the target's total equity value Year 0 2 3 FCFF 8.0 7.4 9.9 12.1 FCFF TV Interest expense 2.0 2.4 2.6 2.9 32% Tax rate 12.0% rE, U 40.0 Pre-merger debt SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW PV/ FCFF Total by $170.77 8.0 7.4 9.9 12.1 Interest tax savings 0.6 0.8 0.8 0.9 TV PV Tax savings/ T $21.47 0.6 0.8 0.8 0.9 Target Firm Value $192.24 Target Equity Valu $152.24

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