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:

Trading Securities

Marketable securities that a company holds for the purpose of trading in the short term, with the intent of generating profit from price movements.

Fair Value

The estimated market value of an asset or liability, reflecting the price that two willing parties would agree to in an arm's length transaction.

Held-to-maturity

A category for debt securities that a company has the positive intent and ability to hold until maturity, reported at amortized cost.

Long-term Investment

Assets purchased by a company to hold for more than one year, typically including stocks, bonds, or real estate.