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Your firm wants to buy AZ Corporation. Your assistant has made the following free cash flow...

Your firm wants to buy AZ Corporation. Your assistant has made the following free cash flow forecast (in millions): Year 1 2 3 FCF $100 $105 $111 After year 3, the firm will produce $111 million per year in perpetuity. AZ has $50 million in long-term debt and there are one million shares outstanding. AZ’s WACC is 9%. 1. What price per share should you offer AZ’s shareholders, assuming no synergies? 2. Now suppose the merged firms will save $10 million per year in costs for the next five years. What is maximum price per share you can offer without destroying value?

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