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The Addison Corporation is planning on introducing a new line of saxophones. They expect sales to be $200,000 per year, with total fixed and variable costs representing 70% of sales. The discount rate on the unlevered firm is 17% but the firm plans to raise $77,820 of the initial $150,000 investment at 9% perpetual debt. The corporation tax rate is 34% and the target debt-to-value ratio is 0.30. Find a) b) c) d) e) f) 6.0 VU ($232,941) VL ($259,400) VL using the FTE approach ($259,400) VL using FCFF (Free cash flow to the firm) ($259,400) Calculate the all equity NPV ($82,941) Calculate APV also called the NPV of the project under leverage ($109,400) Calculate the NPV of the project under leverage using the FTE approach ($109,400) h) Calculate the NPV of the project under leverage using the WACC approach ($109,400)

Practice problem 5: The Addison Corporation is planning on introducing a new line of saxophones. They expect sales to be $200,000 per year, with total fixed and variable costs representing 70% of sales. The discount rate on the unlevered firm is 17% but the firm plans to raise $77,820 of the initial $150,000 investment at 9% perpetual debt. The corporation tax rate is 34% and the target debt-to-value ratio is 0.30 . Find a) VU($232,941) b) VL($259,400) c) VL using the FTE approach ($259,400) d) VL using FCFF (Free cash flow to the firm) ($259,400) e) Calculate the all equity NPV ($82,941) f) Calculate APV also called the NPV of the project under leverage ($109,400) g) Calculate the NPV of the project under leverage using the FTE approach ($109,400) h) Calculate the NPV of the project under leverage using the WACC approach ($109,400)