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1 compute the value of galts equity using the apv method 2

Consider the following situation. Galt Industries is expected to generate free cash flows of $24 million per year. Galt has permanent debt of $80 million, a corporate tax rate of 40%, and an unlevered cost of capital of 12% and its cost of debt capital is 6%.

1. Compute the value of Galt's equity using the APV method.

2. Compute Ts for Galt, and determine the company's WACC.

3. Compute the value of Galt's equity using the WACC method and compute the cost of equity for the company.

4. Compute the expected free cash-ows paid to Galt's equity holders every year.

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Finance Basics: 1 compute the value of galts equity using the apv method 2

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