Valuing an Entity with Buy$-$Manage$-$Sell Model $-$ Value to all Stakeholders

Introduction

Best Simple Foods $($BSF$)$ is a profitable, debt free entity.

operating in steady$-$state forever.

Despite this, the economy is in recession, which has

depressed the price of $BSF\text{'}$s stock.

Your Equity$/$Debt inwestor team is considering buring BSF and restructuring its debt

The asking price for $100\%$ of the firm's stock is:

$$100\mathrm{.}00MM$

Your team believes that an optimal capital structure

for the firm would be:

If your team proceeds with the BSF transaction:

The equity investors will pay $(1-D)(D+E)K$ of the purchase price

from their own funds, equaling:

$$40\mathrm{.}00MM$

BSF will take out a long$-$term loan of $DN(D+E)\%$ of the purchase price

at the time of closing, provided by the team's debt imvestors,

to pay the current owners the rest of the purchase price.

This amount equals:

The equity investors will operate BSF in its

recapitalized steady$-$state for cne year.

At the end of this time:

$100\%$ of the stock will be rescld for an estimated

and the loan will be terminated. $($Frincipal will be repaid$).$

Financing Structure

Find:

The quantities in the green cells. Provide $4$ decinal places for numeric answers.

Free Cash Flows