Debt and expects to generate free cash flows

Reference no: EM131947275

Marpor industries has no debt and expects to generate free cash flows of $16 million each year. marpor believes that if itpermanently increases its level of debt to $35 million, the risk of financial distress may cause it to lose some customers and receive less favorable terms from its suppliers. as a result, marpors expected free cash flows with debt will be only $15 million per year. suppose marpors tax rate is 35%, the risk-free rate is 6%, the expected return of the maret is 13%, and the beta of marpor's free cash flows is 1.1 (with or without leverage)

a) marpors value witout leverage is $______million

b) marpors value with the new leverage is $___________ million

Reference no: EM131947275

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