6 from BD Chapter 18 Propel Corporation plans to make a $50 million investment, initially funded completely with debt. The free cash flows of the investment and Propel's incremental debt from the project follow Year Free Cash Flow Debt 0 50 50 40 30 20 15 25 0 Propel's incremental debt for the project will be paid off according to the predetermined schedule shown Propel's debt cost of capital is 8%, and its tax rate is 30%. Propel also estimates a cost of capital for the project of 10% a) What are the interest payments and interest tax shield cash flows in year 1, 2, and 3? (Hint Interest paymentt -Debtt-1 X TD.) Year Interest payment Interest tax shield CF 0 b) What is the unlevered value of the project in year 0? (Hint: This is not an NPV calculation. Do not subtract the initial investment of $50M.,) c) Use the APV method to determine the levered value of the project in year 0. (Hint: Remember, interest tax shield cash flows are discounted at the debt cost of capital.) 6 from BD Chapter 18 Propel Corporation plans to make a $50 million investment, initially funded completely with debt. The free cash flows of the investment and Propel's incremental debt from the project follow Year Free Cash Flow Debt 0 50 50 40 30 20 15 25 0 Propel's incremental debt for the project will be paid off according to the predetermined schedule shown Propel's debt cost of capital is 8%, and its tax rate is 30%. Propel also estimates a cost of capital for the project of 10% a) What are the interest payments and interest tax shield cash flows in year 1, 2, and 3? (Hint Interest paymentt -Debtt-1 X TD.) Year Interest payment Interest tax shield CF 0 b) What is the unlevered value of the project in year 0? (Hint: This is not an NPV calculation. Do not subtract the initial investment of $50M.,) c) Use the APV method to determine the levered value of the project in year 0. (Hint: Remember, interest tax shield cash flows are discounted at the debt cost of capital.)