Topic: Capital Budgeting and Valuation with Leverage Is it possible to calculate the unlevered value of a firm using the APV method, without knowing the debt level, assuming the growth rate of the EBIT and the interest coverage ratio are constant? I don't think so because then you cannot find the pre-tax WACC. Given information: EBIT FCF Cost of debt CAPM Corporate tax rate Tax paid Interest paid Long-term debt

Question

Topic: Capital Budgeting and Valuation with Leverage

Is it possible to calculate the unlevered value of a firm using the APV method, without knowing the debt level, assuming the growth rate of the EBIT and the interest coverage ratio are constant? I don't think so because then you cannot find the pre-tax WACC.

Given information:

  • EBIT
  • FCF
  • Cost of debt
  • CAPM
  • Corporate tax rate
  • Tax paid
  • Interest paid
  • Long-term debt

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