Question
Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown
Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: 0 -990
1 $125
2 $250
3 $375
4 $500
The firm's tax rate is 34 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 2; if the firm were financed entirely with equity, the required return would be 10 percent. Using the APV method, what is the value of the debt side effects?
$239,072,652.70 | ||
$66,891,713.66 | ||
$59,459,301.03 | ||
$660,000,000 |
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