Problem Set 12

Problem Set 12 - BusM 401 Problem Set #12 Advanced...

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BusM 401 Problem Set #12 Advanced Valuation Techniques Instructions: Complete all questions. This problem set will not be graded, but you will still be required to understand all of the material contained in it. Short answers (“checkpoints”) are available for some questions on Blackboard so that you can check your answers. Full solutions will be available on Blackboard before the exam. (Some full answers are found in the back of Higgins; it’s best not to look at these until you have tried your best to answer the question.) Congratulations, this is your last one. 1. You are valuing STU Corporation’s Alpha project using the APV method. You already found the present value of free cash flows from the project (discounted at the appropriate cost of equity) to be $500,000. The only important side effect of financing is the present value of debt tax shields. The Alpha project can support a constant $1 million in debt over the life of the project, which is 3 years. STU Corp’s tax rate is 50%, and the
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This note was uploaded on 03/01/2012 for the course BUS M 401 taught by Professor Toddmitton during the Fall '10 term at BYU.

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Problem Set 12 - BusM 401 Problem Set #12 Advanced...

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