Question 8 ( 10 points) Lonely Planet Inc. just issued $500 of perpetual 10% debt and used the proceeds to repurchase stock. The company expects to generate $152 of earnings before interest and taxes in perpetuity. Lonely Planet distributes all of its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 20%, and the corporate tax rate is 40%. a. (2 points) What is the value of Lonely Planet as an unlevered firm? b. (3 points) Use the Adjusted Present Value Method to calculate the value of Lonely Planet with leverage. What is the value of the firm's equity? c. (2 points) What is the required return on the firm's levered equity (rs) ? d. (3 points) Use the Flow-to-Equity method to calculate the value of Lonely Planet's equity. Question 8 ( 10 points) Lonely Planet Inc. just issued $500 of perpetual 10% debt and used the proceeds to repurchase stock. The company expects to generate $152 of earnings before interest and taxes in perpetuity. Lonely Planet distributes all of its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 20%, and the corporate tax rate is 40%. a. (2 points) What is the value of Lonely Planet as an unlevered firm? b. (3 points) Use the Adjusted Present Value Method to calculate the value of Lonely Planet with leverage. What is the value of the firm's equity? c. (2 points) What is the required return on the firm's levered equity (rs) ? d. (3 points) Use the Flow-to-Equity method to calculate the value of Lonely Planet's equity