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Estimate the value of the firm and the value of the firm's equity using the APV method. ($ millions) 2020 2021 2022 2023 2024 2025

Estimate the value of the firm and the value of the firm's equity using the APV method.

($ millions)

2020

2021

2022

2023

2024

2025

FCF

200

240

280

320

360

Debt

2,344.95

2,438.66

2,523.32

2,598.24

2,662.72

2,715.98

After 2025, it is assumed that FCF will grow at 2% annually. The Beta for the firm is 1.5 and its marginal tax rate is 39%. The current 10-year treasury rate is 2% and the expected market risk premium is 5%. The firm's cost of debt is 7%. Assuming that the firm will maintain a constant debt to value ratio of 40% forever with no excess cash.

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