17o, 1 OBP P16-14 (similar to) Question Help Marpor Industnes has no debt and expects to generate free cash flows of $16 million each year. Marpor believes that if it permanently increases its level of debt to $45 milion, 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 Hows with debt will be only $15 million per year. Suppose Marpor's tax rate is 21%, the risk-free rate is 3%, the expected return of the market is 12%, and the beta of Marpor's free cash flows is 1.1 (with or without leverage) a. Estimate Marpor's value without leverage b. Estimate Marpor's value with the new leverage a. Estimate Marpor's value without leverage. Marpor's value without leverage is 5 million (Round to the nearest Integer) P18-6 (similar to) Question Help Suppose Alcatel-Lucent has an equity cost of capital of 9.5%, market capitalization of $10.08 billion, and an enterprise value of S14 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.7% and its marginal tax rate is 33% a. What is Alcatel-Lucent's WACC? b. Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here? c. Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is % (Round to two decimal places.) Data Table (Click on the following icon in order to copy its contents into a spreadsheet) Year 0 1 2 3 FCF (5 million) 100 45 105 73 Print Done P18-9 (similar to) Question Help You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment required to launch the product line is $8 million. The product will generate free cash flow of $0.74 million the first year, and this free cash flow is expected to grow at a rate of 6% per year. Markum has an equity cost of capital of 10.7%, a debt cost of capital of 6.85%, and a tax rate of 42% Markum maintains a debt-equity ratio of 0.60 a. What is the NPV of the new product line (including any tax shields from leverage)? b. How much debt will Markum initially take on as a result of launching this product line? c. How much of the product line's value is attributable to the present value of interest tax shields? a. What is the NPV of the new product line (including any tax shields from leverage)? The NPV of the new product line is million (Round to two decimal places)
