Home Essay Help Service Suppose that your firm consists of $50M in cash. Specifically, your firm consists of $10M in debt (issued in perpetuity) and $40M in equity.

Suppose that your firm consists of $50M in cash. Specifically, your firm consists of $10M in debt (issued in perpetuity) and $40M in equity.

Author:

January 11th, 2018

Suppose that your firm consists of $50M in cash. Specifically, your firm consists of $10M in debt (issued in perpetuity) and $40M in equity. You announce that you will take this $50M in cash and invest it into a project that will produce expected after-tax free cash flows of $12.5M in perpetuity. Assume a tax rate of 30 percent. You would like to value this project (and hence your firm) by utilizing the weighted average cost of capital with taxes.Assume throughout the problem that the correct expected return on equity is 20 percent and the correct expected return on debt is 5 percent.a) Based on the numbers given in the problem, calculate the WACC with taxes.b) Using the WACC with taxes, calculate the value of the firm.You might have noticed that the value of the firm that you calculated in (b) is inconsistent with the value of the firm you used to calculate the WACC with taxes ($50M) in part (a). That is, the WACC with taxes you used to value the firm is not internally consistent with the value of the firm used to calculate WACC with taxes. This is a problem when you use WACC with taxes to calculate the value of a project and the project in turn significantly affects the inputs for calculating WACC with taxes.c) What is the correct firm value and WACC with taxes?Hint: you will have to “guess” a value for the firm and calculate WACC with taxes (keep in mind that the value of debt will always equal $10M). Then, using this WACC with taxes, calculate the value of the firm by applying the WACC with taxes to the $12.5M perpetuity. If this calculated value equals your “guess”, then you have the correct value of the firm and WACC with taxes. If it does not equal your guess, you will have to try again until the calculated value equals your guess. Microsoft Excel, particularly the Solver function, might be useful when answering this question.

Turn in your highest-quality paper
Get a qualified writer to help you with

“ Suppose that your firm consists of $50M in cash. Specifically, your firm consists of $10M in debt (issued in perpetuity) and $40M in equity. ”

Get high-quality paper

NEW! AI matching with writer

Calculate the price

Make an order in advance and get the best price

Type of paper

Academic level

Deadline

Pages (550 words)

$0.00

*Price with a welcome 15% discount applied.

Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.

We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.

How it works

Receive a 100% original paper that will pass Turnitin from a top essay writing service

step 1

Upload your instructions

Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.

step 2

Control the process

Once you place an order with our professional essay writing services, we will email you login details to your account. There, you'll communicate with the writer and support team and track the writer's progress.

step 3

Download your paper on time

As soon as your work is ready, we’ll notify you via email. You'll then be able to download it from your account and request a revision if needed. Please note that you can also rate the writer's work in your account.

Pro service tips

How to get the most out of your experience with Essay Fountain

One writer throughout the entire course

If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.

The same paper from different writers

You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."

Copy of sources used by the writer

Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.

Testimonials

See why 20k+ students have chosen us as their sole writing assistance provider

Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.

Social Work and Human Services

Everything looks good. I will have to submit it in Turnitin, and we will see what they say,

Customer 452919, October 14th, 2025

Sociology

Thank you for your service as a team .

Customer 452919, December 1st, 2021

Social Work and Human Services

Thank you for the revision.

Customer 452919, October 6th, 2025

Sociology

I want to thank the entire team. Please know that I am truly grateful for your service.

Customer 452919, November 11th, 2021

History

Thank you

Customer 452919, October 17th, 2024

Sociology

The writer covered all points as expected by the professor. Thank you for your commitment to serve students.

Customer 452919, February 21st, 2024

Sociology

Thank you, Team I sincerely appreciate your service.

Customer 452919, April 13th, 2022

Humanities

Always excellent service, appreciate all the hard work

Customer 452995, January 20th, 2022

Education

I love you guys, yal are the best. Thank you so much !!!

Customer 453117, September 10th, 2022

Social Work and Human Services

The support team was available upon request. For the past two semesters I have been stressing on receiving my assignments on expected achievement dates. I value your service and hope that you all would improve your teamwork. I have been using this service now for 2-years and was totally satisfied. With this being said, I have spent at least a thousand plus dollars with this company. Knowing there are other competing companies that are on the market for a lot less than you guys are charging. "I trust that you all would get it together and avoid last minute communication which increases stress to the student."

Customer 452919, March 27th, 2024

Social Work and Human Services

Thank you for your assistance.

Customer 452919, November 3rd, 2025

Business Studies

This is fantastic! Thank you so much for your hard work!

Customer 453131, November 16th, 2022

11,595

Customer reviews in total

96%

Current satisfaction rate

3 pages

Average paper length

37%

Customers referred by a friend

OUR GIFT TO YOU

15% OFF your first order

Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.

Claim my 15% OFF Order in Chat