The value of Galt's equity using the WACC method is closest to:
A)$150 million
B)$180 million
C)$230 million
D)$240 million

Question

Quizplus · Accepted Answer

A)Using APV = V^L = V^U + T_cD = 11ea7cce_3cb6_a00e_928c_0f98595415af_TB1626_11 + (40%)$80 million = $232 million r_wacc = r_u - dT_c[r_{d +}ϕ(r_u- r_d)] where ϕ = 1 with permanent debt and d = 11ea7cce_3cb6_a00f_928c_3ba6dfe0182c_TB1626_11 r_{wacc = 12% -} 11ea7cce_3cb6_a010_928c_1b5c52e98abb_TB1626_11 (40%)[6% + 1(12% - 6%)] = .103448 Using Wacc Method Value = 11ea7cce_3cb6_c721_928c_171d95eba6d0_TB1626_11 = 11ea7cce_3cb6_c722_928c_a129cee7f553_TB1626_11 = $232 million Value of equity = total value - debt = $232 - $80 = $152 million

The Value of Galt's Equity Using the WACC Method Is