Alvin16
A joint venture consortium is formed today (on date 0) as a stand-alone company.
The company will be liquidated after one year (on date 1) with expected financials on
date 1 as shown below:
Revenue
$ 800 Million
Cost of Goods
($ 500) Million
Depreciation
($ 100) Million
Operating Income
$ 200 million
Tax rate is 40%. Cost of unlevered equity is 15%.
a) Find the value of equity today in an unlevered company.
b) Find the value of levered equity today, in presence of $ 100 million of debt @
10%.