Suppose we are planning to buy a company with the following forecasts:

Year 1 2 3 & afterwards
FCF $5 million $ 5.5 million 3% constant growth rate
Debt level $50 million $35 million Constant debt to equity ratio. Capital will be 50% debt and 50% equity, wd = ws = 0.5.

The cost of debt is 5%
The cost of equity is 20%
The tax rate is 40%
The company has 15 million shares outstanding
The current stock price is $2.05
The company is currently holding no financial assets.
The company has $3,000,000 in debt.
WACC, the cost of capital, is equal to 11.5%
RSU, the cost of unlevered equity, is equal to 12.5%

a. Calculate the value of the debt tax shield.
b. Calculate the horizon value of the target.

Milden company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. as an aid in planning, the company has decided to start using a contribution format income statement. to have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas: cost cost formula cost of good sold $35 per unit sold advertising expense $210,000 per quarter sales commissions 6% of sales shipping expense ? administrative salaries $145,000 per quarter insurance expense $9,000 per quarter depreciation expense $76,000 per quarter management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. units sold and the related shipping expense over the last eight quarters follow: quarter units sold shipping expense year 1: first 10,000 $ 119,000 second 16,000 $ 175,000 third 18,000 $ 190,000 fourth 15,000 $ 164,000 year 2: first 11,000 $ 130,000 second 17,000 $ 185,000 third 20,000 $ 210,000 fourth 13,000 $ 147,000 milden company’s president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter. required: 1. using the high-low method, estimate a cost formula for shipping expe