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What is Emerald unlevered cash flow per year

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Reference no: EM132954837

Question - Emerald Corporation has EBIT of $10m every year in perpetuity. The firm is funded with $50m debt and the rest with equity. Its cost of debt is 4% and WACC is 7%. Corporate tax rate is 30%. The only financing side effect is debt tax shield.

(i) What is Emerald's unlevered cash flow per year?

(ii) What is Emerald's levered cash flow per year?

(iii) Use either the APV approach or the WACC approach to find Emerald's firm value.

(iv) Based on the information given in the question and your answers in (i)-(iii), find Emerald's unlevered cost of capital (RA).

Reference no: EM132954837

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