Calculate the all equity npv assuming no debt

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BC-Boston is planning on introducing a new line of saxophones. They expect sales to be $200,000 with total fixed and variable costs representing 70% of sales. The discount rate on the unlevered equity is 17%, but the firm plans to raise $77,820 of the initial $150,000 investment as 9% perpetual debt. The corporate tax rate is 34% and the target debt to value ratio (or debt ratio) is 0.3.

Problem 1. Calculate the all equity NPV assuming no debt.

Problem 2. Calculate the levered NPV using the flow-to-equity.

Reference no: EM132619170

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