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Wright Brothers is 100% equity financed and expects to generate after tax free cash flows of $17.5 million each year. There are 80 million shares
Wright Brothers is 100% equity financed and expects to generate after tax free cash flows of $17.5 million each year. There are 80 million shares outstanding. Wright Brothers wishes to permanently increase its level of debt to $46 million. The expected after tax free cash flows with debt will be only $16.5 million per year due to the risk of financial distress. Suppose Wright's tax rate is 40.0%, the risk-free rate is 3.0%, the expected return of the market is 13.0%, and the beta of Wright's free cash flows is 1.3, regardless of the leverage. 1. What is the share price of the unlevered firm? $ [Enter to 2 decimal places] 2. What is the total value of the levered firm in millions? \$ millions [Enter to 2 decimal places]
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