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Find the value of the firm assuming the debt levels are constant using APV method, Note this is a finite period problem. Year Forecast 0 1 is 2 3 4 5 6 7 Free cash flows (without tax sheilds) 3.5 3.5 3.6 3 3.4 5.9 6.1 7 6.8 Base-case PV of company 50 50 50 50 50 50 50 50 Debt Interest Interest tax shield PV Interest tax shields 2 APV Tax rate,% Opportunity cost of capital,% WACC,% (to discount horizon valueto year 6) Long-term growth forecast, % Interest rate,% (years 1-6) 25 10 8 4 8 00 Find the value of the firm assuming the debt levels are constant using APV method, Note this is a finite period problem. Year Forecast 0 1 is 2 3 4 5 6 7 Free cash flows (without tax sheilds) 3.5 3.5 3.6 3 3.4 5.9 6.1 7 6.8 Base-case PV of company 50 50 50 50 50 50 50 50 Debt Interest Interest tax shield PV Interest tax shields 2 APV Tax rate,% Opportunity cost of capital,% WACC,% (to discount horizon valueto year 6) Long-term growth forecast, % Interest rate,% (years 1-6) 25 10 8 4 8 00
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