Question 123 An analyst is building a DCF using the unlevered approach and calculates unlevered free cash flows of $100 in the first forecast year and net debt of $800 (51,000 in gross debt, less $200 in cash). After checking her work, she realizes that she did not reflect the following information in her calculations: The company is expected to report $20 in affiliate income and receive $5 in dividends from this investment in the first forecast year. . There is a $130 affiliate income balance on the balance sheet which she believes reflects the market value of the investment Question: Which of the following is the appropriate treatment of the equity investment when valuing the company using the unlevered FCFF approach? To calculate enterprise value, increase the base year free cash flows from $100 to $120. To arrive analyst should reduce net debt from $800 to $670. equity value, the To calculate enterprise value, increase the base year free cash flow from $100 to $115. To arrive at equity value, the analyst leave net debt unchanged at $800. Tie untevered FCFF approach To calculate enterprise value, increase the base year free cash flows from $100 to $120. To arrive at equity value, the analyst should reduce net debt from $800 to $670. To calculate enterprise value, increase the base year free cash flow from $100 to $115. To arrive at equity value, the analyst leave net debt unchanged at $800, To calculate enterprise value, leave the base year free cash flow unchanged at $100. To arrive at equity value, the analyst should increase net debt unchanged [KL 1) at $800 To calculate enterprise value, increase the base year free cash flows frory$100 to $120. To arrive at equity value, the analyst should leave net debt unchanged at $800. To calculate enterprise value, leave the base year free cash flow unchanged at $100. To arrive at equity value, the analyst should reduce net debt from $800 to $670. Next