Start with the partial model in the file Ch21 P08

Start with the partial model in the file Ch21 P08 Build a Model.xlsx on the textbook's Web site. Kasperov Corporation has an unlevered cost of equity of 12% and is taxed at a 40% rate. The 4-year forecasts of free cash flow and interest expenses are shown in the following table; free cash flow and interest expenses are expected to grow at a 5% rate after Year 4. Using the compressed APV model, answer the following questions.

Start with the partial model in the file Ch21 P08

a. Calculate the estimated horizon value of unlevered operations at Year 4 (i.e., immediately after the Year-4 free cash flow).
b. Calculate the current value of unlevered operations.
c. Calculate the estimated horizon value of the tax shield at Year 4 (i.e., immediately after the Year-4 free cash flow).
d. Calculate the current value of the tax shield.
e. Calculate the current total value.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...

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