8. Exhibit 8.19 displays key financial information for VidCo, an entertainment firm. Fill in the shaded areas of the exhibit to arrive at a value of the operations using the adjusted present value model. Assume that the interest tax shields are as risky as the overall firm.

EXHIBIT 8.19 VidCo: Key Financial Figures

$ million Forecast year FCF Discounted FCF Prioryear debt Interest rate, %

Interest payment Marginal tax rate, %

Interest tax shield

(ITS)

Discounted ITS 1 100.0 1,000.0 8.0 35.0 2 105.0 1,040.0 8.0 35.0 3 110.3 1,081.6 8.0 35.0 4 115.8 1,124.9 8.0 35.0 5 121.6 1,169.9 8.0 35.0 6 127.6 1,216.7 8.0 35.0 7 134.0 1,265.3 8.0 35.0 8 140.7 1,315.9 8.0 35.0 9 147.7 1,368.6 8.0 35.0 10 155.1 1,423.3 8.0 35.0 Continuing value 1,480.2 8.0 Continuing value Sum of discounted FCFs Sum of discounted ITSs Marginal tax rate, % 35.00 Unlevered cost of equity, % 10.00 PV of FCF and ITS Midyear adjustment factor Value of operations