In-fusion is hoping to develop a new drug to attack and, Ask an Expert

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In-Fusion is hoping to develop a new drug to attack and kill leukaemia cells. The firm will start operations next year (t=1). Exhibit 1 shows financial projections for years 0 through 6. Starting in year 7, EBIT as well as Assets are expected to grow at 3% per year in perpetuity. Please make the following assumptions:

1. The risk-free rate is 4% and the market risk premium is 5%.

2. The CAPM required rate of return on assets is 11.5% (i.e. βA = 1.5).

3. The corporate tax rate is 35%.

4. The firm has $200 million in debt yielding 7% (2 percentage points above its expected return). Debt is expected to remain at the $200 million level for the indefinite future.

What is the DCF value of In-Fusion?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92777305

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