Constant debt equity ratio maintained

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Q. Apex Corporation has an equity cost of capital of 14.4% and a debt of 6%, and the firm maintains a debt equity ratio of 1.apex is considering an expansion that will contribute $4 million in free cash flows the first year, growing by 4% per year thereafter. The expansion will cost $60 million and will be financed with $40 million in new debt initially with a constant debt equity ratio maintained thereafter. Apex's corporate tax is 40%,tax rate interest income is 40%,and the tax rate on equity income is 20%.compute the value of the expansion using the APV method.

Reference no: EM138856


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