2) Marpor Industries has no debt and expects to generate free cash flows of $ 14 million each year. Marpor believes that if it 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

$13 million per year. Suppose Marpor's tax rate is 35 %, 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).

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 million. _______________ (Round to the nearest integer.)

b. Estimate Marpor's value with the new leverage. Marpor's value with the new leverage is _____________million. (Round to two decimal places.)