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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