(Answered) Dustin electric inc is about to be acquired by the firms

Accounting

Dustin electric inc. Is about to be acquired by the firm's management from the firm s founder for $15 million in cash. The purchase price will be financed with $10 million in notes that are to be repaid in $2 million increments over the next five years.

At the end of this five -year period, the firm will have no remaining debt. The fcfs are expected to be $3 million a year for the next five years. Begining in year 6, the fcfs are expected to grow at a rate fo 2% per year into the indefinite future.

If the unlevered cost of equity for dustin is approximately 15% and the firm 's borrowing rate on the buyout debt is 10% (before taxes at a rate of 30%), what is your estimate of the value of the firm ?

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