Use the following information to answer the question(s)below.
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%.
-The value of Galt's equity using the APV method is closest to:
A)$150 million
B)$180 million
C)$230 million
D)$240 million

Question

Quizplus · Accepted Answer

A)APV = V^L = V^U + T_cD = 11ea7cce_3cb5_dcb9_928c_f162e22c20ff_TB1626_11 + (40%)$80 million = $232 million Value of equity = total value - debt = $232 - $80 = $152 million

Use the Following Information to Answer the Question(s)below