1. The Somewhat Cool Corporation (ticker: SCC) currently has EBIT of $500 million (for 2015). These were earned on revenues of $2 billion (up from $1740 million). Capital expenditures were $200 million, while depreciation was $100 million. Working capital (net operating) needs are 5% of revenue and are expected to continue at that level. SCC's free cash flows are expected to grow at a rate of 15% for the next 2 years, at which point they are expected to ease to a long-run growth rate of 6%. SCC has 50% debt and 50% equity in its capital structure, and a cost of debt of 8%. SCC's cost of equity is 13%. a a) What is the firm's value (at the end of 2015) if the tax rate is 36% (use the WACC (NPV) approach)? + b) Estimate an APV valuation under the assumption that the debt (50% of the value in (a)) is permanent. c) Can you change your assumptions in an obvious way so that the APV value is almost identical to the WACC valuation in (a)? Show how this is done. 1. The Somewhat Cool Corporation (ticker: SCC) currently has EBIT of $500 million (for 2015). These were earned on revenues of $2 billion (up from $1740 million). Capital expenditures were $200 million, while depreciation was $100 million. Working capital (net operating) needs are 5% of revenue and are expected to continue at that level. SCC's free cash flows are expected to grow at a rate of 15% for the next 2 years, at which point they are expected to ease to a long-run growth rate of 6%. SCC has 50% debt and 50% equity in its capital structure, and a cost of debt of 8%. SCC's cost of equity is 13%. a a) What is the firm's value (at the end of 2015) if the tax rate is 36% (use the WACC (NPV) approach)? + b) Estimate an APV valuation under the assumption that the debt (50% of the value in (a)) is permanent. c) Can you change your assumptions in an obvious way so that the APV value is almost identical to the WACC valuation in (a)? Show how this is done