Use the below information to value a levered company with constant annual perpetual cash flows from assets. The next cash flow will be generated in one year from now, so a perpetuity can be used to value this firm. Both the operating and firm free cash flows are constant (but not equal to each other).
| Data on a Levered Firm with Perpetual Cash Flows | ||
| Item abbreviation | Value | Item full name |
| OFCF | $100m | Operating free cash flow |
| FFCF or CFFA | $112m | Firm free cash flow or cash flow from assets (includes interest tax shields) |
| g | 0% pa | Growth rate of OFCF and FFCF |
| WACCBeforeTax | 7% pa | Weighted average cost of capital before tax |
| WACCAfterTax | 6.25% pa | Weighted average cost of capital after tax |
| rD | 5% pa | Cost of debt |
| rEL | 9% pa | Cost of levered equity |
| D/VL | 50% pa | Debt to assets ratio, where the asset value includes tax shields |
| tc | 30% | Corporate tax rate |
What is the value of the levered firm including interest tax shields?