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Posted on Jul 29, 2024

Milton Industries expects free cash flows of $7 million each year. Milton's corporate tax rate is 40%, and its unlevered cost of capital is 16%.

Milton Industries expects free cash flows of $7 million each year. Milton's corporate tax rate is 40%, and its unlevered cost of capital is 16%. Milton also has outstanding debt of $16.49 million, and it expects to maintain this level of debt permanently.

a. What is the value of Milton Industries without leverage? (Round to three decimal places)

b. What is the value of Milton Industries with leverage? (Round to three decimal places)

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