Sallie's Sandwiches
Sallie's Sandwiches is financed using 20% debt at a cost of 8%.Sallie projects combined free cash flows and interest tax savings of $2 million in Year 1, $4 million in Year 2, $5 million in Year 3, and $117 million in Year 4.(The Year 4 value includes the combined horizon values of FCF and tax shields.) All cash flows are expected to grow at a 3% constant rate after Year 4.Sallie's beta is 2.0, and its tax rate is 25%.The risk-free rate is 6%, and the market risk premium is 5%.
-Using the data for Sallie's Sandwiches and the compressed adjusted present value model, what is the total value (in millions) ?
A) $72.37
B) $73.99
C) $74.49
D) $75.81
E) $76.45
Correct Answer:
Verified
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