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Please fill in the blanks 0% Debt/ 100% Equity 25% Debt/ 75% Equity 50% Debt/ 50% Equity Pure business cash flows: EBIT Taxes (@ 34%)

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0% Debt/ 100% Equity 25% Debt/ 75% Equity 50% Debt/ 50% Equity Pure business cash flows: EBIT Taxes (@ 34%) EBIAT + Depreciation - Capital exp. + Change in net working capital Free cash flow $1,485 $505 $980 $500 ($500) $1,485 $505 $980 $500 ($500) $1,485 $505 $980 $500 ($500) $980 $980 $980 Unlevered beta Risk-free rate Market premium Unlevered WACC 0.8 5.0% 6.0% 0.8 5.0% 6.0% 0.8 5.0% 6.0% Value of pure business flows: (FCF/Unlevered WACC) Financing cash flows: Interest Tax reduction Pretax cost of debt 5.0% 5.0% 5.0% Value of financing effect: (Tax reduction/Pretax cost of debt) Total value (Sum of values of pure business flows and financing effects) 0% Debt/ 100% Equity 25% Debt/ 75% Equity 50% Debt/ 50% Equity Pure business cash flows: EBIT Taxes (@ 34%) EBIAT + Depreciation - Capital exp. + Change in net working capital Free cash flow $1,485 $505 $980 $500 ($500) $1,485 $505 $980 $500 ($500) $1,485 $505 $980 $500 ($500) $980 $980 $980 Unlevered beta Risk-free rate Market premium Unlevered WACC 0.8 5.0% 6.0% 0.8 5.0% 6.0% 0.8 5.0% 6.0% Value of pure business flows: (FCF/Unlevered WACC) Financing cash flows: Interest Tax reduction Pretax cost of debt 5.0% 5.0% 5.0% Value of financing effect: (Tax reduction/Pretax cost of debt) Total value (Sum of values of pure business flows and financing effects)

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