1. LeRoux Ltd. (LL) is analyzing a corporate investment project. The project costs $80 milliontoday.It is expected to generate free cash flows of $6 million one year from now.Thisamount is expected to grow by 10% per year until the end of year 5. This annual growthrate is forecasted to then slow to 5% per year until the end of year 10. It is anticipated thatthe annual growth rate during years 11-15 will be8%, and that project free cash flows afteryear 15 will be zero. LL has a corporate tax rate of 32%. LL continually maintains a targetdebt-equity ratio of 2/3, and it plans to finance this new project in the same way. LL has adebtof 0.15 and an equityof 1.25. Assume that the risk-free interest rate is 3% and theexpected return on the market portfolio is 8%.(a) Calculate each of the following (in all cases, report your answers in percentage form withtwo decimal places, e.g. 4.56%):debt cost of capital;equity cost of capital;debt-value ratio;equity-value ratio; andweighted average cost of capital.Assume that the interest rate paid on the LL's debt is equal to the debt cost of capital.Calculate the NPV of the project using the WACC approach. To do this, follow thetemplate file and construct a table in your spreadsheet with 3 rows: "Year", "Free cashflow", and "Levered project value". You will need columns corresponding to years 0-15.Note that levered project value is the continuation value of the project, so it will bezero for year 15 (include this value of zero in your spreadsheet, i.e. do not leave the cellblank). For previous years, this can be calculated asVLt=FCFt+1+VLt+11 +rwacc.Next, calculate NPV in two ways:based on your table using values for year 0; andusing theNPV()spreadsheet function.(b) Calculate the unlevered cost of capital. Report your answer in percentage form to twodecimal places. Then calculate the NPV of LL's project using the APV approach. Todo this, follow the template file and construct a table in your spreadsheet with 7 rows:"Year", "Free cash flow", "Unlevered project value", "Debt capacity", "Interest taxshield", "Tax shield value", and "Levered project value". Note that tax shield value foryeartis the present value at that time of the interest tax shields for yearst+ 1,...,15.Complete the table, including zeroes for values that should be equal to zero (i.e. do notleave any cells in the 7 rows blank). Ensure that the values in this table do not dependin any way on the values from your table in part (a). Note that this means that you willhave circular references. Next, determine NPV in two ways:based on your table using values for year 0; andusing theNPV()spreadsheet function (you may need to use this function more thanonce).(c) Determine the NPV of LL's project using the FTE approach. To do this, follow thetemplate file and construct a table in your spreadsheet with 7 rows: "Year", "Free cash2

flow", "Debt capacity", "After-tax interest payments", "Net borrowing", "Free cash flowto equity", and "Value of free cash flow to equity". Note that value of free cash flow toequity for yeartis the present value at that time of the free cash flows to equity foryearst+ 1,...,15. In each year, this will be equal to the equity value of the project.Complete the table, including zeroes for values that should be equal to zero. Ensurethat the values in this table do not depend in any way on the values of your tables fromparts (a) and (b). Note that this means that you will have circular references. Next,determine NPV in two ways:based on your table using values for year 0; andusing theNPV()spreadsheet function