You were very helpful on the last one, could you assist with this one as well?

PART 5 Assume the free cash flows from the Banana Republic project are given below. Assume the weight of the debt, wd, is 54%, the cost of debt, rd = 6%, the tax rate = 35%, ru = 8% and 500 shares of stock are outstanding. 20) The debt capacity, Dt, in year 3 is closest to: 21) The present value of the interest tax shield is closest to (HINT: remember to use ru as the discount rate): 22) The interest tax shield, ITS, stated as a percentage is closest to: 23) The unlevered value of the project, Vu is closest to: 24) The levered value of the project, VL is closest to: 25) The unlevered price per share is closest to (HINT: Eu = Vu * we): 26) The levered price per share is closest to (HINT: EL = VL*we): 27) The free cash flow to equity in year 3 is closest to: BONUS...see box below. GIVEN: wd = rd = Tc = Ru = re = rwacc = Shares outstanding = Year FCF Disc. Rate, rwacc PV 20) Dt $ 0 (50,000) $ 1 19,075 $ 2 25,051 $ 3 26,705 $ 4 28,491 Interest Tax Shield 21) PV of Tax Shield 22) ITS% = 23) Vu= 24) VL = 25) Price, Unlevered 26) Price, Levered Year FCF After Tax Interest Debt Flows 27) Flows to Equity 0 1 2 3 4 NPV PV BONUS: (.25 pts) Summarize your recommendations for 1) purchasing the machine and 2) financing the project. Support your recommendations with the results of your analysis by relating the NPV to the project and also to the financing options (what portion of the NPV is related to each?). PART 5 Assume the free cash flows from the Banana Republic project are given below. Assume the weight of the debt, wd, is 54%, the cost of debt, rd = 6%, the tax rate = 35%, ru = 8% and 500 shares of stock are outstanding. 20) The debt capacity, Dt, in year 3 is closest to: 21) The present value of the interest tax shield is closest to (HINT: remember to use ru as the discount rate): 22) The interest tax shield, ITS, stated as a percentage is closest to: 23) The unlevered value of the project, Vu is closest to: 24) The levered value of the project, VL is closest to: 25) The unlevered price per share is closest to (HINT: Eu = Vu * we): 26) The levered price per share is closest to (HINT: EL = VL*we): 27) The free cash flow to equity in year 3 is closest to: BONUS...see box below. GIVEN: wd = rd = Tc = Ru = re = rwacc = Shares outstanding = Year FCF Disc. Rate, rwacc PV 20) Dt 54% 6% 35% 8.0% 9.53% 6.49% 500 $ Interest Tax Shield 21) PV of Tax Shield 0 1 2 3 (50,000) $ 19,075 $ 25,051 $ 26,705 $ 1.000 0.939 0.882 0.828 (50,000) 17,913 22,091 22,115 45,509.35 35,836.43 23,907.06 11,964.82 2,731 955.70 2,155 22) ITS% = 81,281 24) VL = 83,436 25) Price, Unlevered 74.78 26) Price, Levered 76.76 NPV PV 1,434 502.05 1 19,075 $ 1,775 18,509 35,809 $ 2 25,051 $ 1,398 (9,673) 13,980 $ 718 251.26 1.13% 23) Vu= Year FCF After Tax Interest Debt Flows 27) Flows to Equity 2,150 752.56 4 28,491 0.778 22,157 $ 0 (50,000) $ $ (27,000) (23,000) $ 3 26,705 $ 932 (11,929) 13,843 $ 4 28,491 467 (11,942) 16,083 $ 34,276.57 $ 84,277 BONUS: (.25 pts) Summarize your recommendations for 1) purchasing the machine and 2) financing the project. Support your recommendations with the results of your analysis by relating the NPV to the project and also to the financing options (what portion of the NPV is related to each?). Answer: Recommendation for purchasing the machine: Yes, it is recommended to purchase the machine because the NPV is greater than zero indicating that the machine will generate a cash inflow of $34,276.57. As per the NPV selection rule, if the project's NPV is greater than zero then it can be selected by the company for investment purposes. Recommendation for financing option: From the above calculation it is clear that using leverage will boost the share price to $76.76. If the company is not using leverage then the share price will increase only to $74.78. Thus, making use of leverage will increase the value of firm and the shareholders of the company. PART 5 Assume the free cash flows from the Banana Republic project are given below. Assume the weight of the debt, wd, is 54%, the cost of debt, rd = 6%, the tax rate = 35%, ru = 8% and 500 shares of stock are outstanding. 20) The debt capacity, Dt, in year 3 is closest to: 21) The present value of the interest tax shield is closest to (HINT: remember to use ru as the discount rate): 22) The interest tax shield, ITS, stated as a percentage is closest to: 23) The unlevered value of the project, Vu is closest to: 24) The levered value of the project, VL is closest to: 25) The unlevered price per share is closest to (HINT: Eu = Vu * we): 26) The levered price per share is closest to (HINT: EL = VL*we): 27) The free cash flow to equity in year 3 is closest to: BONUS...see box below. GIVEN: wd = rd = Tc = Ru = re = rwacc = Shares outstanding = Year FCF Disc. Rate, rwacc PV 20) Dt 54% 6% 35% 8.0% 9.53% 6.49% 500 $ Interest Tax Shield 21) PV of Tax Shield 0 1 2 3 (50,000) $ 19,075 $ 25,051 $ 26,705 $ 1.000 0.939 0.882 0.828 (50,000) 17,913 22,091 22,115 45,509.35 35,836.43 23,907.06 11,964.82 2,731 955.70 2,155 22) ITS% = 81,281 24) VL = 83,436 25) Price, Unlevered 74.78 26) Price, Levered 76.76 NPV PV 1,434 502.05 1 19,075 $ 1,775 18,509 35,809 $ 2 25,051 $ 1,398 (9,673) 13,980 $ 718 251.26 1.13% 23) Vu= Year FCF After Tax Interest Debt Flows 27) Flows to Equity 2,150 752.56 4 28,491 0.778 22,157 $ 0 (50,000) $ $ (27,000) (23,000) $ 3 26,705 $ 932 (11,929) 13,843 $ 4 28,491 467 (11,942) 16,083 $ 34,276.57 $ 84,277 BONUS: (.25 pts) Summarize your recommendations for 1) purchasing the machine and 2) financing the project. Support your recommendations with the results of your analysis by relating the NPV to the project and also to the financing options (what portion of the NPV is related to each?). Answer: Recommendation for purchasing the machine: Yes, it is recommended to purchase the machine because the NPV is greater than zero indicating that the machine will generate a cash inflow of $34,276.57. As per the NPV selection rule, if the project's NPV is greater than zero then it can be selected by the company for investment purposes. Recommendation for financing option: From the above calculation it is clear that using leverage will boost the share price to $76.76. If the company is not using leverage then the share price will increase only to $74.78. Thus, making use of leverage will increase the value of firm and the shareholders of the company. PART 5 Assume the free cash flows from the Banana Republic project are given below. Assume the weight of the debt, wd, is 54%, the cost of debt, rd = 6%, the tax rate = 35%, ru = 8% and 500 shares of stock are outstanding. 20) The debt capacity, Dt, in year 3 is closest to: 21) The present value of the interest tax shield is closest to (HINT: remember to use ru as the discount rate): 22) The interest tax shield, ITS, stated as a percentage is closest to: 23) The unlevered value of the project, Vu is closest to: 24) The levered value of the project, VL is closest to: 25) The unlevered price per share is closest to (HINT: Eu = Vu * we): 26) The levered price per share is closest to (HINT: EL = VL*we): 27) The free cash flow to equity in year 3 is closest to: BONUS...see box below. GIVEN: wd = rd = Tc = Ru = re = rwacc = Shares outstanding = Year FCF Disc. Rate, rwacc PV 20) Dt 54% 6% 35% 8.0% 9.53% 6.49% 500 $ Interest Tax Shield 21) PV of Tax Shield 0 1 2 3 (50,000) $ 19,075 $ 25,051 $ 26,705 $ 1.000 0.939 0.882 0.828 (50,000) 17,913 22,091 22,115 45,509.35 35,836.43 23,907.06 11,964.82 2,731 955.70 2,155 22) ITS% = 81,281 24) VL = 83,436 25) Price, Unlevered 74.78 26) Price, Levered 76.76 NPV PV 1,434 502.05 1 19,075 $ 1,775 18,509 35,809 $ 2 25,051 $ 1,398 (9,673) 13,980 $ 718 251.26 1.13% 23) Vu= Year FCF After Tax Interest Debt Flows 27) Flows to Equity 2,150 752.56 4 28,491 0.778 22,157 $ 0 (50,000) $ $ (27,000) (23,000) $ 3 26,705 $ 932 (11,929) 13,843 $ 4 28,491 467 (11,942) 16,083 $ 34,276.57 $ 84,277 BONUS: (.25 pts) Summarize your recommendations for 1) purchasing the machine and 2) financing the project. Support your recommendations with the results of your analysis by relating the NPV to the project and also to the financing options (what portion of the NPV is related to each?). Answer: Recommendation for purchasing the machine: Yes, it is recommended to purchase the machine because the NPV is greater than zero indicating that the machine will generate a cash inflow of $34,276.57. As per the NPV selection rule, if the project's NPV is greater than zero then it can be selected by the company for investment purposes. Recommendation for financing option: From the above calculation it is clear that using leverage will boost the share price to $76.76. If the company is not using leverage then the share price will increase only to $74.78. Thus, making use of leverage will increase the value of firm and the shareholders of the company