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1) Newkirk Inc has expected annual earnings before interest and taxes of $230 million in perpetuity

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1) Newkirk Inc has expected annual earnings before interest and taxes of $230 million in perpetuity. The current reported return on the firm's equity is 16% and the average interest rate on its debt obligations is 9.5%. The firm's last balance sheet statement reported total debt obligations of $642 million and total equity of $856 million. The firm has been paying 25% of its net income as dividends each year. Newkirk Inc. is subject to a corporate tax rate of 20%. The firm is planning to recapitalize by raising additional $200 million of debt at the same interest rate of 9.5% and using all the proceeds to buy back shares. Further, the company is planning to increase its dividend payout ratio from 25% to 100% five years from now.

1. (5 points) Calculate the value of the company before the recapitalization is announced using FCF method.

1. (5 points) Calculate the value of the company after the recapitalization is announced using APV method. 
2. (5 points) Calculate the value of the company after the recapitalization is announced using ECF (equityholder cash flow) method. 
3. (5 points) Calculate the value of the company after the recapitalization is announced using dividend discount model. 

(5 points) Compare your answers to a. through d. and discuss the differences, if any.  Which number do you believe to be more precise in this situation? Why?