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Equity vs firm valuation Year 1 CF(equity) Int. exp. (1-tax) CF(firm) 50 40 90 23 60 40 100 3 68 40 108 4 76.2

Equity vs firm valuation Year 1 CF(equity) Int. exp. (1-tax) CF(firm) 50 40 90 23 60 40 100 3 68 40 108 4 76.2 5 83.49 40 40 116.2 40 123.49 Terminal val. 1603 2363.008 Cost of equity is 13.625% and WACC is 9.94%. 1 Value the equity. 2 Value the firm. 3 What is the implied after-tax cost of debt?

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