Question
Milton Industries expects free cash flow of $13 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 11%.
Milton Industries expects free cash flow of $13 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 11%. Milton also has outstanding debt which is valued at $59.12 million, and it expects to maintain this level of debt permanently.
a. What is the value of Milton Industries without leverage?
b. What is the value of Milton Industries with leverage?
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Multinational Finance
Authors: Kirt C. Butler
4th Edition
1405181184, 978-1405181181
