What is the current unlevered value of operation

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A company forecasts the free cash flow of $400 for year 1 and $600 for year 2. After year 2 the FCF will grow at a constant rate of 5%. The company also forecasts the tax saving from interest deduction is $200 for year 1 and $100 and for year 2. After year 2 the tax saving will grow at a constant rate of 5%.The unlevered cost of equity is 10% -

a) What is the horizon value of operation at year 2?

b) What is the current unlevered value of operation?

c) What is the horizon value of tax shield at year 2?

d) What is the current value of tax shield?

e) What is the current levered value of operation?

Reference no: EM131558627

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