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Hi, can you answer the second part of C and show the work? Thank you. Compressed Adjusted Present Value Schwarzentraub Corporation's expected free cash flow
Hi, can you answer the second part of C and show the work? Thank you.
Compressed Adjusted Present Value Schwarzentraub Corporation's expected free cash flow for the year is $300,000; in the future, free cash flow is expected to grow at a rate of 9%. The company currently has no debt, and its cost of equity is 14%. Its tax rate is 25%. Suppose the firm issues $8 million debt at a rate of 6%. Use the compressed adjusted value approach to answer the following questions. Do not round intermediate calculations. a. Find Vy. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ 6.00 million b. Find VL. Use the APV model that allows for growth. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ 8.40 million Find rsl. Use the APV model that allows for growth. Round your answer to one decimal place. 174 % c. Start with the value of the unlevered firm, VU from part a. Use the MM model (with taxes but with zero growth) to calculate VL. (Hint: This answer will differ from that in part b due to differences in growth assumptions.) Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ 8.00 million Start with the value of the unlevered firm, Vy from part a. Use the MM model (with taxes but with zero growth) to calculate rsl. (Hint: This answer will differ from that in part b due to differences in growth assumptions.) Round your answer to one decimal place. %Step by Step Solution
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