Solution 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 A B C D E F G H I Wansley Portal Inc a large Internet service
Solution A B C D E F G H I Wansley Portal Inc
Solution A B C D E F G H I
C D E F G H I Wansley Portal Inc a large Internet service
Solution A B C D E F G
H I Wansley Portal Inc a large Internet service
Solution A B C D E
Solution A B
(Solution) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 A B C D E F G H I Wansley Portal Inc., a large Internet service...

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Help! I need to find the value of equity using the APV method2015 2016 2017 2018 2019 2020 Net sales $500 $600 $700 $760 $806 Selling and administrative expense 60 70 80 90 96 Interest 30 40 45 60 74 Tax rate of ACC before the merger 30% Tax rate after merger 35% Cost of goods sold as a % of sales 65% Debt ratio (percent financed with debt) before the merger 30% Cost of debt before merger 9% Beta of ACC 1.40 Risk-free rate 7% Market risk premium 6.5% Terminal growth rate of free cash flow 6.0% Pre-merger debt (in thousands) $ 400 What is the equity value of the ACC to Wansley (Note use APV method)? Wansley Portal Inc., a large Internet service provider, is evaluating the possible acquisition of Alabama Connections Company (ACC), a regional Internet service provider. Wansley's analysts project the following post merger data for ACC (in thousands of dollars): All cash flows shown in the income statements are assumed to occur at the end of the year. ACC currently has a capital structure of 30 percent debt, which costs 9 percent. ACC, if independent, would pay taxes at 30 percent, but its income would be taxed at 35 percent if it were consolidated. ACC's current market-determined beta is 1.40. The cost of goods sold including depreciation is expected to be 65 percent of sales. Gross investment in operating assets is expected to be equal to depreciation--replacing worn out equipment, so net investment in operating assets will be zero. The risk-free rate is 7 percent, and the market risk premium is 6.5 percent. ACC currently has $400,000 in debt outstanding. ACC has no short-term investment. Terminal growth rate of free cash flow is 6%. A B C D E F G H I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

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