3. Two possible approaches to valuation discussed in class are (1) the enterprise discounted cash flow methode (FCFF) and (w) the adjustest present value (APV) method. Briefly describe how financial leverage affects the value of a company in each of these methods. (2 points) Effect of financial leverage on value under the enterprise discounted cash flow method: Effect of financial leverage on value under the APV method: 4. Consider the following information about Squarepants Formal Wear (dollar amounts in millions): Year Year 2 Year 3 EBIT 20.0 25.0 30.0 Capex 10.0 125 Depr 60 7.5 Working Capital 4.0 50 60 15.0 90 The tax rate is 40% and the WACC is 10%. Last year's working capital was 3.0. Beginning in year 3, cash flows are sasted to grow at 5% per year. The firm has unutilized fored assets worth $20M and debt worth $30M. Find the present value of Free Cash Flows in years 1-2 (2 points) b) Find the present value (value today) of continuing value of cash flows received after year 2 (2 points)