You have been given the following projections for A&J Limited: _ 7 Year 1 2 3 4 5 ' Free cash flow of the firm 400 460 540 620 620 lntcrest-bearing debt 750 700 600 500 700 Interest expense 100 85 74 60 50 Compute the enterprise value ol'A&J Limited using the following assumptions: Beyond year 5, the cash flow to the firm ofA&J Limited will grow at a constant rate of 10 percent per annum (a) Ari-J's unlevcrcd cost of equity is 15 percent and its borrowing rate will be 12 percent After year 5. Adi] limited will maintain a debt~equity ratio of 1:2 (b) The tax rate for is 30 percent (0) The risk~free rate is 7 percent ((1) The market risk premium is 8 percent, . 

Calculate the enterprise value ot'A&J Limited. 

Answer rating: 100% (QA)

To calculate the enterprise value EV of AJ Limited we need to follow these steps 1 Calculate the terminal value of the firms cash flows beyond year 5 ... View the full answer