Financial Management, 12th Edition by Pearson

CHAPTER 16

Valuation and Financing

LEARNING OBJECTIVES

• Calculate asset (unlevered) beta and levered beta with risky and risk-free debt assuming no taxes and pre-tax WACC.
• Show calculation of levered and unlevered beta under taxes under conditions of risky and risk-free debt.
• Explain the methods of unlevering and relevering beta under capital structure changes.
• Justify the use and limitations of WACC to calculate the ­discounted value of free cash flows.
• Illustrate with an example the conditions under which FCF, ECF and CCF approaches will provide the same solutions.
• Calculate PV, APV and ‘compressed’ APV of a project and value of subsidised financing.
• Show the use of the MM adjusted cost of capital and the Miles-Ezzell’s adjusted cost of ...