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WACC is the Weighted Average Cost Of Capital APV is Adjusted Present Value Solutions given by professor a) r* = .1057 b) APV = 73.9986
WACC is the Weighted Average Cost Of Capital
APV is Adjusted Present Value
Solutions given by professor
a) r* = .1057
b) APV = 73.9986
c) APV = 73.9986 , r = .1158
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Problem 7.3. The Fulsome Gas Co. is evaluating a new energy project. An investment of $112.4 million is required, and the project is forecasted to generate future cash flows of $19.7 million per year in perpetuity. Fulsome has a current market value of $2.65 billion. It maintains a target debt ratio of 25%, and the returns on its debt and equity are estimated to be 5.5% and 12.9%, respectively. Fulsome faces a tax rate of 35%. Ignore brokerage costs. a. Calculate the WACC for Fulsome. b. Calculate the APV of the project using method. Calculate the APV of the project using the conventional methodStep by Step Solution
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