Now suppose that with leverage, Kohwes expected free cash flows will decline to $9 million per year

Question:

Now suppose that with leverage, Kohwe’s expected free cash flows will decline to $9 million per year due to reduced sales and other financial distress costs. Assume that the appropriate for Kohwe’s future free cash flows is still 8%. What is Kohwe’s share price today given the financial distress costs of leverage?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...