What is estimate of the value for the target company

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Problem 1: You are evaluating a target company and this target company generates free cash flows of $2,000,000 a year. This $2,000,000 is free cash flow available to both the debtholders and the stockholders. No growth is expected and the  $2,000,000 is considered perpetual in nature. Additionally, you believe the optimal financing for this acquisition is 60 percent debt and 40 percent equity. You estimate the after-tax cost of debt to be 5% and the after-tax cost of equity to be 8%. What is your estimate of the value for this target company?

Reference no: EM132883188

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