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Chapter 18, Problem 25P

XL Sports is expected to generate free cash flows of $10.9 million per year. XL has permanent debt of $40 million, a tax rate of 40%, and an unlevered cost of capital of 10%.

  1. a. What is the value of XL’s equity using the APV method?
  2. b. What is XL’s WACC? What is XL’s equity value using the WACC method?
  3. c. If XL’s debt cost of capital is 5%, what is XL’s equity cost of capital?
  4. d. What is XL's equity value using the FTE method?
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Chapter 18 Solutions

Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)

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Discounted cash flow model; Author: Edspira;https://www.youtube.com/watch?v=7PpWneOBJls;License: Standard YouTube License, CC-BY