Excel Online Structured Activity: Adjusted Present Value

Schwarzentraub Industries' expected free cash flow for the year is $$550,000$; in the future, free cash flow is expected to grow at a rate of $8\%.$ The company currently has no debt, and its cost of equity is $12\%.$ Its tax rate is $40\%.($Hint: Use the equations mentioned below.$)$

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

"Adjusted Present Value

Expected free cash flow, CF $$550,000$

FCF growth rate, g $8\mathrm{.}00\%$

Cost of equity, rsU $12\mathrm{.}00\%$

Tax rate, T $40\mathrm{.}00\%$

Debt, D $$8,000,000$

Cost of debt, rd $9\mathrm{.}00\%$

No Debt Case: Formulas

VU $=$ #N$/$A

With Debt Case:

VL $=$ #N$/$A

S $=$ #N$/$A

rsL $=$ #N$/$A

MM Model $($With Taxes$)$

VL $=$ #N$/$A

S $=$ #N$/$A

rsL $=$ #N$/$A$"$

Find VU$.$ Enter your answer in millions. For example, an answer of $$1\mathrm{.}21$ million should be entered as $1\mathrm{.}21,$ not $1,210,000.$ Do not round intermediate calculations. Round your answer to two decimal places.

$ fill in the blank $\_\_\_\_\_\_$ million

Find VL if Schwarzentraub uses $$8$ million in debt with a cost of $9\%.$ Use the APV model that allows for growth. Enter your answer in millions. For example, an answer of $$1\mathrm{.}21$ million should be entered as $1\mathrm{.}21,$ not $1,210,000.$ Do not round intermediate calculations. Round your answer to two decimal places.

$ fill in the blank $\_\_\_\_\_$ million

Find rsL$.$ Do not round intermediate calculations. Round your answer to one decimal place.

fill in the blank $\_\_\_\_\%$

Based on VU from part a$,$ find VL using the MM model $($with taxes$)$ if Schwarzentraub uses $$8$ million in $9\%$ debt. Enter your answer in millions. For example, an answer of $$1\mathrm{.}21$ million should be entered as $1\mathrm{.}21,$ not $1,210,000.$ Do not round intermediate calculations. Round your answer to two decimal places.

$ fill in the blank $\_\_\_\_$ million

Find rsL$.$ Do not round intermediate calculations. Round your answer to one decimal place.

fill in the blank $\_\_\_\%$