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Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $12.8 million before interest per year
Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $12.8 million before interest per year in perpetuity, with each company distributing all its earnings as dividends. Levered's perpetual debt has a market value of $76 million and costs 7 percent per year. Levered has 3.4 million shares outstanding that sell for $92 per share. Unlevered has no debt and 5.1 million shares outstanding, currently worth $75 per share. Neither firm pays taxes. What is the value of each company's equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Unlevered Levered
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