Use the Following Information to Answer the Question(s)below

question 84

Multiple Choice

Use the following information to answer the question(s) below.
Galt Industries is expected to generate free cash flows of $24 million per year.Galt has permanent debt of $80 million,a corporate tax rate of 40%,and an unlevered cost of capital of 12% and its cost of debt capital is 6%.
-The value of Galt's equity using the APV method is closest to:

• A)$150 million
• B)$180 million
• C)$230 million
• D)$240 million

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Definitions:

Batch

A set of goods or materials processed or produced at the same time, often used in the context of batch processing.

Split-Off Point

That point in the manufacturing process where some or all of the joint products can be recognized as individual products.

Sales Value

The total revenue attained from goods or services sold, calculated by multiplying the selling price by the number of units sold.

Absorption Costing

A costing method where all manufacturing costs, both fixed and variable, are allocated to products, thus "absorbing" them into the cost of goods sold.