Based on the attached spreadsheet (loosely based on the APV example in class), compute the following with a 34% tax rate:

(a)Firm value according to APV where the present value of the interest tax shield is computed using Pre-tax WACC, not the cost of debt.

(10 points)

(b)Firm value according to CCF. (10 points).The APV and CCF valuations will be identical. Note that depreciation, CAPEX, and change in NWC are all zero.

Excel File Edit View Insert Format Tools Data Window Help O ) 78% Wed 7:41 PM apple Q APV and CCF Question for Second Test (3) Q Search Sheet Home Insert Draw Page Layout Formulas Data Review View "+ Share X Cut Calibri (Body) 11 A- Wrap Text Custom AutoSum Copy Fill Paste B I U A KEE Merge & Center $ % " .00 $.0 Conditional Format Cell nsert Delete Format Sort & Format Clear Find & Formatting as Table Styles Filter Select Recover Unsaved Workbooks. We were able to save changes to one or more files. Do you want to recover them? Yes H18 fx A B C D E F G H K IN Interest Paid $21.60 $19.10 $17.80 $16.70 $15.80 W 4 Free Cash Flows 6 EBIT $22.70 $29.80 $37.10 $40.10 $42.10 -Taxes $7.72 $10.13 $12.61 $13.63 $14.31 34% tax rate 8 = Unlevered Free Cash Flow $14.98 $19.67 $24.49 $26.47 $27.79 No depreciation, no CAPEX, no change in NWC 9 10 Unlevered Cost of Equity 13.50% Pre-tax WACC or Return on Assets 11 Cost of Equity 24.00% 12 Cost of Debt 9.50% 13 Terminal Growth Rate 0.00% 14 15 16 17 18 19 20 21 APV and CCF +