Question
Sheldon Corporation projects the following free cash flow (FCFs) and interest expenses for the next 3 years, after which FCF and interest expenses are expected
Sheldon Corporation projects the following free cash flow (FCFs) and interest expenses for the next 3 years, after which FCF and interest expenses are expected to grow at a constant 7% rate. Sheldon's unlevered cost of equity is 11% its tax rate is 25%
| Year 1 | Year 2 | Year 3 | |
| Free cash flow ( $ millions) | $ 20 | $ 30 | $ 40 |
| Interest expense ( $ millions ) | $ 12.8 | $ 14.4 | $ 16 |
What is Sheldon's unlevered horizon value of operations at Year 3?
What is the current unlevered value of operations?
What is horizon value of the tax shield at Year 3?
What is the current value of the tax shield?
What is the current total value of the company?
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The Finance Book
Authors: Stuart Warner, Si Hussain
2nd Edition
1292401982, 978-1292401980
