100038050_HW14

# 100038050_HW14 - Problem 2 APV = NPV(All-Equity...

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APV = NPV(All-Equity) + NPV(Financing Side Effects) NPV = –\$2,100,000 + (1 – 0.30)(\$850,000)PVIFA4,8% + (0.30)(\$600,000)PVIFA4,8% NPV (All-equity) = – \$94,784.72 NPV(Financing Side Effects) NPV = (\$2,100,000 – 21,000) – (1 – 0.30)(0.095)(\$2,400,000)PVIFA4,8% – \$2,100,000/(1.095)3 + 0.30(\$6,000) PVIFA4,8% NPV = \$200,954.57 APV = –\$94,784.72 + 200,954.57 APV = \$106,169.85 Problem 3 Sales \$3,000,000 COGS 1,350,000 Interest 88,500 EBT \$586,500 Taxes 234,600 NI \$351,900 PV(Flow-to-equity) = \$351,900 / 0.19 PV(Flow-to-equity) = \$1,852,105.26 b) VL = B + S B / S = 0.40 B / \$1,852,105.26 = 0.40 B = \$740,842.11 V = \$1,852,105.26 + 740,842.11 V = \$2,592,947.37 Problem 4 The yield to maturity in the company’s bonds is: \$975 = \$45(PVIFAR%,40) + \$1,000(PVIFR%,40) R = .0464 or 4.64% the YTM on the bonds is: YTM = 4.64 × 2 YTM = 9.28% b. We can use the Capital Asset Pricing Model to find the return on unlevered equity. R0 = RF + βUnlevered(RM – RF)

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100038050_HW14 - Problem 2 APV = NPV(All-Equity...

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