Aswath Damodaran 364
Disney: Estimating Unlevered Firm Value
Current Market Value of the Firm = $ 55 , 101 +$ 14 , 668 = $ 69 , 789
- Tax Benefit on Current Debt = $ 14 , 668 * 0. 373 = $ 5 , 479 million
- Expected Bankruptcy Cost = 1. 41 % ( 0. 25 69 , 789 )= $ 984 million
Unlevered Value of Firm = $ 65 , 294 million
Cost of Bankruptcy for Disney = 25 % of firm value
Probability of Bankruptcy = 1. 41 %, based on firm’s current rating of A-
Tax Rate = 37. 3 %
To implement APV, you have to first estimate the unlevered firm value.
