1. FOR THIS AND THE NEXT 2 QUESTIONS. The following data are for a target firm in a merger valuation. The analysis is based on the adjusted present value (APV) approach. Calculate the unlevered horizon value of the firm.

   Current market value of equity	$70
   Value of debt	$20
   Debt ratio	0.60
   Cost of unlevered equity	10%
   WACC	12%
   Growth rate after the horizon: g	4%
   Tax rate: T	40%
   	Current	Year 1	Year 2	Year 3
   Revenues		$115.00	$125.00	$150.00
   Cost of goods sold		80.00	95.00	110.00
   Selling and administration expenses		10.00	12.00	13.00
   Depreciation		10.00	10.00	10.00
   EBIT		$15.00	$8.00	$17.00
   Interest charges		$2.00	$2.50	$3.00
   Total net operating capital	$200.00	$205.00	$208.00	$215.00

   		$55.47
   		$80.67
   		$20.80
   		$67.28
   		None of the above

1 points

QUESTION 2

1. Refer to above data. Calculate the horizon value of the interest tax savings.

   		$55.47
   		$80.67
   		$20.80
   		$67.28
   		None of the above

1 points

QUESTION 3

1. Refer to above data. Calculate the value of the target firm's operations.

   		$55.47
   		$80.67
   		$20.80
   		$67.28
   		None of the above