A company forecasts free cash flow of $400 at Year 1 and $600 at Year 2; after
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A company forecasts free cash flow of $400 at Year 1 and $600 at Year 2; after Year 2, the FCF grow at a constant rate of 5%.
The company forecasts the tax savings from interest deductions as $200 in Year 1, $100 in Year 2; after Year 2, the tax savings grow at a constant rate of 5%. The unlevered cost of equity is 9%. What is the horizon value of operations at Year 2?
($15,750.0) What is the current unlevered value of operations?
($14,128.4) What is the horizon value of the tax shield at Year 2?
($2,625.0) What is the current value of the tax shield? ($2,477.1)
What is the levered value of operations at Year 0?
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Related Book For
Intermediate Financial Management
ISBN: 9781337395083
13th Edition
Authors: Eugene F. Brigham, Phillip R. Daves
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