Template for RJR Leverage Buyout Your answers may be slightly different from the textbook because the textbook has small errors. har ro Assumptions are in this color rb 14% 13.5% 0.25 0.34 Target debt to value ratio Tax Rate WACC Calculation Cost of Levered Equity, rs I WACC 2 1 1 2 3 4 5 6 3% B Short Horizon Growth Rates 5 FCFF 5 Short period Interest - Short period Interest Tax Shield 2612.1 5404.0 3384.0 4311.0 3004.0 2173. 0 3111.0 2 336.0 3294.0 2536.0 3483.0 B e Terminal Values Terminal Value at target debt ratio 2 Unlevered Terminal Value (UTV) B Tax-Shields in Terminal Value 5 s Present Values 3 PVO of short horizon FCFF @r0 PVO of terminal FCFF or PVO of UTV @ro PVO of short horizon tax-shields @ rb 1 PVO of tax-shields in Terminal Value @ rb 3 Total Value of Levered Firm . Template for RJR Leverage Buyout Your answers may be slightly different from the textbook because the textbook has small errors. har ro Assumptions are in this color rb 14% 13.5% 0.25 0.34 Target debt to value ratio Tax Rate WACC Calculation Cost of Levered Equity, rs I WACC 2 1 1 2 3 4 5 6 3% B Short Horizon Growth Rates 5 FCFF 5 Short period Interest - Short period Interest Tax Shield 2612.1 5404.0 3384.0 4311.0 3004.0 2173. 0 3111.0 2 336.0 3294.0 2536.0 3483.0 B e Terminal Values Terminal Value at target debt ratio 2 Unlevered Terminal Value (UTV) B Tax-Shields in Terminal Value 5 s Present Values 3 PVO of short horizon FCFF @r0 PVO of terminal FCFF or PVO of UTV @ro PVO of short horizon tax-shields @ rb 1 PVO of tax-shields in Terminal Value @ rb 3 Total Value of Levered Firm