6. Company A is considering a project (the only project for the company) with the following estimated unlevered cash flows: (Two years life time for the company) Year 2 $2,000 600 $1,400 Year 1 EBIT $%1,000 300 $700 Tax@30% Company A finances its projects with 70% equity and 30% debt. The firm has calculated its cost of equity to be 12%. The corporate tax rate is 40% and interest on debt is tax deductible. The borrowing cost for the firm is 6%. a) Using the FCFs and WACC to calculate the leveraged firm value [6 Marks] Using the un-levered CF and Tax-Shied Cash Flows to calculate their present values (and the leveraged firm value equals the sum of the two) b) [6 Marks] Will the results (of the leveraged firm value) in the above two be equal? (Simple answer with "Yes" or "No" is not enough; you should provide your explanation.) c) 18 Marks] Total [20 Marks] Useful formulae for the Question 6: WACC-Re*We+Rd*Wd* (1-To) Re-Ru (Ru-Rd) (D/E)