Generic Everything is a taxable organization that is subject to 20% marginal tax rate. Generic Everything is considering a purchase of ve helicopters as well as some landing pads on hospital grounds. Generic Everything anticipates that its D/E ratio will be 1/2 in the future. In order to nance the purchase, Generic Everything sold for $777;454 a three-year, zero coupon bond with face value of $900;000. The CEO estimates that the acquisition of helicopters will provide a temporary boost in earnings over the next three years. The expected return on the market is 9% and the risk-free rate is 3%. The scenario table for each of the next three years is as follows: Demand Probability Depreciation EBIT High 1/3 50,000 500,000 Medium 1/3 50,000 400,000 Low 1/3 50,000 300,000 Since Generic Everything is not a publicly traded company, information regarding its true equity beta cannot be estimated from existing data. However, information is available regarding the equity beta for a competitor in the health care industry, Gecko Health. Gecko has historically maintained a D/E ratio equal to 1/4 and is tax exempt (i.e., it pays zero tax). Its debt beta is estimated to be 0.2, while its equity beta is estimated to be 0.8. You want to value the project using APV method. (a) What are the expected annual after-tax Unlevered Cash Flows associated with the project? (b) What is the discounted value (PV) of the after-tax Unlevered Cash Flow stream? (c) Compute an amortization table for the bond. (d) Compute the value of the tax shield provided by the debt, from the perspective of Generic Every- thing. (e) What is the projects APV? Assuming that the the total cost of the project is $0.7 million should Generic invest into it?

This is not worth any points at all, I am just a little confused on how to solve it completely.