Estimate? marpor value with the new leverage

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Marpor Industries has no debt and expects to generate free cash flows of $15 million each year. Marpor believes that if it permanently 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, Marpor's expected free cash flows with debt will be only $14 million per year. Suppose? Marpor's tax rate is 21%?, the? risk-free rate is 5%?, the expected return of the market is 13%?, and the beta of? Marpor's free cash flows is 1.2 ?(with or without? leverage).

Problem a. Estimate? Marpor's value without leverage.

Problem b. Estimate? Marpor's value with the new leverage

Reference no: EM132774034

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