Question
XYZ Corp estimates the following FCFs and interest expenses for 2019 and 2020. After 2020 the firm expects that both FCFs and interest expenses will
XYZ Corp estimates the following FCFs and interest expenses for 2019 and 2020. After 2020 the firm expects that both FCFs and interest expenses will be growing at a constant 6 percent rate indefinitely. XYZs unlevered cost of equity is 15%. Corporate tax rates are 21%. (15 points /3 points each)
|
| 2019 | 2020 |
| FCF (millions) | $35 | $50 |
| Interest expense (millions) | $4 | $6 |
What is the firms unlevered horizon value in 2020?
What is the firms current unlevered value?
What is the horizon value of the tax shield in 2020?
What is the current value of the tax shield?
What is the current total value of the company?
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