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You are running a major tech company, Technology Innovation Inc. ( TIC ) , and are thinking about investing in electric vehicles ( EV )

You are running a major tech company, Technology
Innovation Inc. (TIC), and are thinking about investing in
electric vehicles (EV) through a new solely owned start-up,
TIC2. The new endeavor requires an initial investment of
$50.00 billion (year 0) and yields a perpetual pre-tax earnings
of $10.00 billion per year, starting the following year (year 1).
TIC2's tax rate is 20.00%.
TIC is currently all equity financed and can issue new equity
to finance the initial investment of TIC2. It can also raise new
capital through TIC2 to fund the investment. There is a listed
company, eCar, which is in the EV business. You have the
following data:
Assume that CAPM is valid, the risk-free interest rate is
1.24%, the risk premium on the market portfolio is 6.89%, and
eCar keeps its debt-to-value ratio constant.
For parts (A)(C), suppose you finance the initial investment by issuing equity through TIC2.
(A) What is the after-tax cash flow of TIC2 each year? ...(IN BILLION DOLLARS)
(B) What is the discount rate you should use to value TIC2 after-tax cash flow? ...%
(C) What is the NPV of TIC2?...(IN BILLION DOLLARS)
Suppose that TIC has more than $50.00 billion of cash sitting on its balance sheet, earning 1.24% interest rate, and you can use the cash to fund TIC2s initial investment without impacting TICs current business.
(D) If you choose to do so, what should be TIC2s NPV?...(IN BILLION DOLLARS)
For parts (E)(G), suppose you finance the initial investment by issuing both debt and equity through TIC2. The income from TIC2 can cover a total interest payment of $1.00 billion per year with no risk. Therefore, you issue a risk-free perpetual bond, on which TIC2 will pay an annual interest of $1.00 billion.
(E) What is the tax shield generated by using debt each year? ...(IN BILLION DOLLARS)
(F) What is the present value of interest tax shields? ...( IN BILLION DOLLARS)What is the NPV of TIC2 under this financing strategy?
(G) What is the NPV of TIC2 under this financing strategy? ...(IN BILLION DOLLARS)
Please help me to answer all question (from B to G), I got question A correct but start from part B i got it wrong (my answer 8.13%). Please DON'T USE CHATGPT as it yield incorrect answer or else don't attempt to answer it if you don't know (be considerate); i will report you to the chegg.
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