Tablet Company sells cheap, rugged computers in developing countries. The debt schedule for the firm is predetermined and shown below for years 0,1 , and 2. After year 2 , the firm will maintain a fixed level of debt equal to 700 . The free cash flows of the firm for years 0 to 2 are as follows: Assume that after year 2 the FCFs grow at a rate of 1% each year. The expected return on debt is 5%, and the tax rate is 40%. (a) Suppose you find a competitor to the firm Tablet is considering seting up, which holds 50% debt and 50% equity in its capital structure. The competitor has a cost of debt of 4% and a cost of equity of 26%. What is the competitor's unlevered cost of capital? Use that number for your estimate of rU for the rest of the problem. (b) Calculate the value of the firm as of year 2 using the Adjusted Present Value (APV) method. Be sure to include the value of the tax shield in your calculations. (c) Use the APV method to calculate the levered value (total value) of the firm as of year 0 and year 1 . Tablet Company sells cheap, rugged computers in developing countries. The debt schedule for the firm is predetermined and shown below for years 0,1 , and 2. After year 2 , the firm will maintain a fixed level of debt equal to 700 . The free cash flows of the firm for years 0 to 2 are as follows: Assume that after year 2 the FCFs grow at a rate of 1% each year. The expected return on debt is 5%, and the tax rate is 40%. (a) Suppose you find a competitor to the firm Tablet is considering seting up, which holds 50% debt and 50% equity in its capital structure. The competitor has a cost of debt of 4% and a cost of equity of 26%. What is the competitor's unlevered cost of capital? Use that number for your estimate of rU for the rest of the problem. (b) Calculate the value of the firm as of year 2 using the Adjusted Present Value (APV) method. Be sure to include the value of the tax shield in your calculations. (c) Use the APV method to calculate the levered value (total value) of the firm as of year 0 and year 1