4. Tablet Company is looking to set up a wholly owned subsidiary firm, which will sell File Preview gged computers in developing countries. The debt schedule for the firm is pined and shown below for years 0, 1, and 2. After year 2, the firm will maintain a fixed level of debt equal to 700. The free cash flows of the firm for years 0 to 2 are as follows: Year 0 1 2 FCF - 150 200 Debt 900 800 700 Assume that after year 2 the FCFs grow at a rate of 2% each year. The expected return on debt is 4%, and the tax rate is 40%. 2 Suppose you find a competitor to the firm Tablet is considering setting up, which holds 60% debt and 40% equity in its capital structure. The competitor has a cost of debt of 4% and a cost of equity of 20%. What is the competitor's unlevered cost of capital? Use that number for your estimate of ru for the rest of the problem. Calculate the unlevered value of the firm as of right now (year 0). (c) Use the APV method to calculate the levered value (total value) of the firm as of right now (year 0). (d) What is the value of the firm's equity as of right now (year 0)? (Hint: Remember that VDE, and use your answers from part c)