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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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