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9 Question 9 (Company Valuation) In this question we attempt to value a company (rather than a project) using the valuation technique we have learned so far. Specifically, the company is expected generate the following cash flows for the next 5 years: Year 2- 3 4. Se ise 18 20 232 Free Cash Flows (SM) 22e After year 5, the company's cash flows are expected to grow at a constant rate of 5% forever. Beta of the company's stock is 1.2. The expected return of the S&P 500 Index is 12.5%. The T-bill rate is 3.5%. A. Suppose that the company is financed with 100% cquity. What is the value of the company today (t = 0)? B. Suppose that the company is financed with 50% debt and 50% equity. The company's bonds currently trade at par and pay 7% coupons. The corporate tax rate for the company is 21%. What is the value of the company today (t-0)? (Note) The pattern of the firm cash flows follows a "non-constant growth model" discussed in Che Stocks and Their Valuation." Also, see Ch7 "Bonds and Their Valuation for a review of the relation between bond price, face value, coupon rate, and yield to maturity