Examine values with and without leverage

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Reference no: EM1369894

Examine values with and without leverage.

Permanently increases its level of debt to $40 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 $15 million per year. Suppose Marpor's tax rate is 35%, the risk-free rate is 5%, the expected return of the market is 15%, and the beta of marpor's free cash flows is

1. a. Estimate Marpor's value without leverage.

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

Reference no: EM1369894

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