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Spreadsheet Assignment Complete the following textbook questions: Start with the partial model in the file Ch21 P08 Build a Model.xlsx on the textbook’s

Spreadsheet Assignment

Complete the following textbook questions:

Start with the partial model in the file Ch21 P08 Build a Model.xlsx on the textbook’s Web site. Kasperov Corporation has an unlevered cost of equity of 12% and is taxed at a 40% rate. The 4-year forecasts of free cash flow and interest expenses are shown in the following table; free cash flow and interest expenses are expected to grow at a 5% rate after Year 4. Using the compressed APV model, answer the following questions.

INPUTS (In Millions) Projected

Year: 1 2 3 4

Free cash flow $200 $280 $320 $340

Interest expense $100 $120 $120 $140

a. Calculate the estimated horizon value of unlevered operations at Year 4 (i.e., immediately after the Year-4 free cash flow).

b. Calculate the current value of unlevered operations.

Current value of unlevered operations = Estimated horizon value of unlevered operations at Year 4 x (1

c. Calculate the estimated horizon value of the tax shield at Year 4 (i.e., immediately after the Year-4 free cash flow).

d. Calculate the current value of the tax shield.

e. Calculate the current total value.

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