Calculate the value of leroy shipping using the apv method

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Suppose Leroy's Shipping (LS) has a total of $500 in debt. The company expects to generate $151.52 in cash flows before interest and taxes in perpetuity. LS can issue perpetual debt at an interest rate of 10%. Unlevered firms in the same industry have a cost of capital of 20%, and the corporate tax rate is 34%.

(a) Calculate the value of Leroy's Shipping using the APV method.

(b) Using this value, calculate the WACC for Leroy's Shipping?

Reference no: EM132185106

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