textbook for the problem description but use the following given nu PROBLEM 5-8 GUSTY POWER COMPANY Project generates perpetual cash flow, debt principal is never repaid, CAPEX is equal to Depre Annual project FCF is $ 9,5000,000.00, and the tax rate is 35% a. Project specific WACC , Project Value using book values for Debt and Equity Project costs $ 150,000,000.00 Project FCF (1-30 yrs) $ 9,500,000.00 Non-recourse loan (book debt) $ 125,000,000.00 Loan interest rate (Rd) 8.00% Equity-Plains $ 12,500,000.00 Equity-others $ 12,500,000.00 Assume capex = depreciation Assume perpetual cash flows 35.00% tax rate 10.25% cost of equity change from textbook change from textbook change from textbook change from textbook change from textbook change from textbook change from textbook Operational FCF work from bottom up EBIT $ Taxes @ 35% $ NOPAT $ Depreciation CAPEX Change in net operational working capital $ - there is no working capital so this is 0 Operational FCF $ EBIT Interest EBT Tax (35%) EAT (Net Income) Equity FCF $ WACC computations Weights Weight % Rd, Re Tax rate Tc Kd, Ke Weighted Kd, Ke 9,500,000.00 - Debt Equity D+E WACC b. Project Value and Project Finance WACC i) Iterative Process Iteration Number 1 2 3 4 5 Book debt $ $ $ $ $ Trial value of equity 125,000,000.00 $ 25,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 Book debt + Trial value of equity ### 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 125,000,000.00 ii) Excel Solver Process (show Solver report for solutions) Iteration Number 1 Book debt Trial value of equity $ 125,000,000.00 $ 25,000,000.00 Book debt + Trial value of equity ### c.Project FCFs are growing at 2.50 % i) Excel Solver Process (show Solver report for solutions) Book debt + Trial value of Iteration Number Book debt Trial value of equity equity 1 $ 125,000,000.00 $ 85,483,870.97 ### but use the following given numbers 8 MPANY epaid, CAPEX is equal to Depreciation each period 0, and the tax rate is 35% Score Max 50 Exam 150 Extra Max 150 Bonus al so this is 0 WACC WACC 0.00% Project Value Difference () in Value of project Computed (based on WACC) value of equity Equity Value 25 ort for solutions) WACC WACC Project Value Value of project based on WACC Difference () in Computed value of equity Equity Value WACC Project Value 2.50% rt for solutions) WACC Value of project based on WACC Imputed value Difference () in of equity Equity Value 150 150