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Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $28.9 million before interest per year
Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $28.9 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 $90 million and costs 7 percent per year. Levered has 2.2 million shares outstanding, currently worth $116 per share. Unlevered has no debt and 4.4 million shares outstanding, currently worth $78 per share. Neither firm pays taxes. What is the value of each firm? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars (e.g.,1,234,567).) Value of Firm Unlevered Levered
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