Question
You want to start a new construction company. You think that your FCF will be $100,000 in the first year and grow at 4% per
You want to start a new construction company. You think that your FCF will be $100,000 in the first year and grow at 4% per year. With 0 debt, you estimate that your cost of equity (unlevered cost of capital) will be 13%. What is the enterprise value of your company? = 1111111.11
QUESTION 5 Using the info from Q4 You think that adding some debt to your company can help boost the enterprise value. Assume the corporate tax rate is 15%. First, you consider borrowing $338,449 in debt with a cost of debt of 6%. If you plan to keep debt at this level forever, what is the enterprise value of your company? (Hint: Use APV for this question) = 1161878.46
QUESTION 6 Using the info from Q4 You think that adding some debt to your company can help boost the enterprise value. Assume the corporate tax rate is 15%. Next, you consider using a debt-to-equity ratio of 1:2 with a cost of debt of 6%. If you plan to keep the debt to equity ratio constant, what is the enterprise value of your company? (hint: Calculate new cost of equity, then WACC, then EV)?????
#6?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started