solution to hw4.pdf - 1 Solutions of HW4 1 A 385 14 40 1 9...

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1 Solutions of HW4 1 A) % 385 . 14 %) 40 1 %)( 9 ( 5 . 0 % 16 ) 1 )( ( 0 0 0 0 0 = × + = + = r r r T r r S B r r c b s 81 . 432 , 388 14385 . 1 000 , 000 , 10 14385 . 1 000 , 000 , 13 14385 . 1 000 , 000 , 8 000 , 000 , 24 3 2 = + + + = NPV 53 . 928 , 749 09 . 1 000 , 000 , 4 09 . 1 000 , 000 , 4 09 . 1 000 , 000 , 4 09 . 1 000 , 000 , 4 % 9 ) 4 . 0 1 ( 09 . 1 000 , 000 , 8 % 9 ) 4 . 0 1 ( 09 . 1 000 , 000 , 12 % 9 ) 4 . 0 1 ( 000 , 000 , 12 ) ( 3 2 3 2 = × × × × × × = loan NPV 53 . 928 , 749 09 . 1 09 . 0 000 , 000 , 4 4 . 0 09 . 1 09 . 0 000 , 000 , 8 4 . 0 09 . 1 09 . 0 000 , 000 , 12 4 . 0 3 2 = × × + × × + × × = = shield tax of value present net NPVF 72 . 495 , 361 53 . 928 , 749 81 . 432 , 388 = + = + = NPVF NPV APV B) In world of no tax, there is no NPVF. Because the after tax cash flow are 8,000,000, 13,000,000 and 10,000,000, the tax rate is 40%, so we have to calculate before tax cash flows first. flow cash tax after T flow cash tax before C = × ) 1 ( 98 . 611 , 352 , 15 ) 4 . 0 1 ( 14385 . 1 000 , 000 , 10 ) 4 . 0 1 ( 14385 . 1 000 , 000 , 13 ) 4 . 0 1 ( 14385 . 1 000 , 000 , 8 000 , 000 , 24 3 2 = × + × + × + = NPV 2 A) m m S 550 55 10 = × = % 013 . 10 % 12 550 200 550 %) 35 1 ( % 7 550 200 200 ) 1 ( = × + + × × + = + + + = s c B WACC r S B S T r S B B r
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