1. Holiday trees Inc. is an unlevered firm that expects to generate an after-tax cash flow stream of $250 million next year and is expected to grow at a rate of 4% per year. The beta of the unlevered value of this free cash flow stream is 1.5. the risk-free rate of interest is 6%, and the risk premium on the market portfolio is 7. The corporate tax rate is 40%. assume all debt is risk-free.

1. What is the value of unlevered firm?
2. The firm decides to lever itself to a 50% debt-to-equity ratio. Calculate WACC?
3. Calculate value of the levered firm?