... with accounting numbers in this case, certain assumptions were made for this analysis. First, since AHP has high quality earnings it is assumed that the cash and accounting numbers will be close over the long term. Second, the level of debt taken on in these scenarios is going to go into perpetuity, getting replaced as it matures. Also the risk level of future tax shields is the same as the risk level of the debt of the firm. Finally it is assumed that the firm can borrow in all three scenarios at 14%. The analysis compares AHP issuing debt and retiring equity in three scenarios: 30%, 50%, and 70%. As depicted in Figure 1, Appendix A, the unlevered value of the firm (VU) is $4665.0 million. The required return, ru, was calculated using the constant dividend growth model where the dividends/share of $1.90 divided by a current stock price of $30/share ...

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