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4. Assume the stream of expected free cash flow to the firm is a level perpetuity and that the firm's outstanding debt is permanent. Also
4. Assume the stream of expected free cash flow to the firm is a level perpetuity and that the firm's outstanding debt is permanent. Also use the following data. Revenue=$1600 Depreciation=$100 COSTS=$600 Interest=$120 Investment=$100 Im -rf = 8% rs = 4% Be = 1.35 ra = 5% T = 34% AAccounts Receivable =$30 AAccounts Payable =$20 AInventory =$50 Answer the following questions: (1) Using the free cash flow to equity method (FCFE), compute the value of equity, debt, and firm value. (ii) Using the free cash flow to the firm method, compute the value of the firm. Use capital structure weights of Debt-to-firm value ratio 30% and Equity-to-firm value ratio 70%. (iii) Using the adjusted present value method (APV) compute the value of the firm if it were unlevered, the value of interest tax shields, and the overall levered firm value. Use capital structure weights of Debt-to-firm value ratio 50% and Equity-to-firm value ratio 50%
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