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Assignment 1. CAPM and WACC in valuation ITERNATIONAL CELL PHONE (ICP) has perpetual earnings before interest and taxes of $550 the corporate tax rate is 40%. ICP uses a debt-to-equity ratio of 0.75. ICP's cost of debt is the risk-free rate of interest. ICP's depreciation expenses are not tax deductible and just offset capital expenditures in each year, and changes in working capital are zero. ICP has a 100% payout policy. The risk-free interest rate is 8.25% and the \"market premium\" (market rate less the risk-free rate) is 8.5%. We don't know ICP's asset beta, but we believe Comp Co.'s assets have the same risk as ICP. We know the following about Comp Co.: its debt value is $13,945, its market value of equity value is $7,000, its tax rate is 36%, its debt beta is 0.3725, and its equity beta is 1.80. (Note: The expected return on any asset i can be measured using the CAPM, Ri RF [RM RF ] , where RM - RF is the \"market premium\".) A. Complete the following table entries (Excel is available on the course web page). 1 Valuation problem End of year 0 1 2 3 4 annual cash flows EBIT $550.00 $550.00 $550.00 $550.00 interest EBT Taxes NI Dep CAPEX Change in WC Avail cash flow Equity cash flow annual debt schedule Beginning debt Debt terminal value estimates Firm Value Debt Equity annual discounting Debt/capital Equity/capital Asset beta All equity WACC Debt beta Equity beta Cost of equity Cost of debt WACC-cost of capital 2