Marpor Industries has no debt and expects to generate free cash flows of $17 million each year. Marpor believes that if it permanently increases its level of debt to $30 million, the risk of financial distress may cause it to lose some customers and receive less favourable terms from its suppliers. As a result, Marpor's expected free cash flows with debt will be only $16 million per year. Suppose Marpor's tax rate is 40%, the risk-free rate is 3%, the expected return of the market is 14%, 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.