Valuing an Entity with Buy-Manage-Sell Model -- Value to all Stakeholders Introduction Just Q Tips (JQT) is a profitable, debt free entity, operating in steady-state forever. Despite this, the economy is in recession, which has depressed the price of JQT's stock. Your Equity/Debt investor team is considering buying it and restructuring its debt. The asking price for 100% of the firm's stock is: Your team believes that an optimal capital structure for the firm would be: If your team proceeds with the Just Q Tips transaction: - The equity investors will pay (1D)/(D+E)% of the purchase price from their own funds. - Just Q Tips will take out a long-term loan at the moment of close, provided by the debt investors on the team, to pay the current owners the rest of the purchase price. - The equity investors will operate Just Q Tips in its recapitalized steady-state for three years. - At the end of this time: 100% of the stock will be resold for an estimated $72.0000MM and the loan will be terminated. (Principal will be repaid). Financing Structure Existing As purchased Key Rates Existing35.000%7.000%4.800%4.800%Aspurchased35.000%10.000%7.530%6.80900% Free Cash Flows A competing Equity/Debt investor team (CT for short) is also considering buying JQT. CT agrees with your assumptions and approach except that a) they believe that JQT's optimal capital structure is D/(D+E) b) 100% of the stock (calculated with CT 's D/(D+E) ratio) will be resold for an estimated MM Question 6 Question 7 Assume for this question (irrespective of answers to any other questions) that CT 's Estimate of Sp(D+E) is $205.20 and CT 's Estimate of JQT's FCF(D+F) is $6.825. Also assume that CT can (and will) use your estimate of as-purchased rwacc because they are not radically changing D/(D+E) from your value. Using these numbers, what is CT's estimate of JQT's Enterprise Value