c) Milton Industries expects free cash flows of $5 million each year. Milton's corporate tax rate...

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c) Milton Industries expects free cash flows of $5 million each year. Milton's corporate tax rate is 30%, and its unlevered cost of capital is 10%. The firm also has outstanding debt of $20 million, and it expects to maintain this level of debt permanently. i) What is the value of Milton Industries without leverage? (1 mark) ii) What is the value of Milton Industries with leverage? (2 marks) iii) Based on your answers in i) and ii), discuss the impact of capital structure on firm value under Modigliani and Miller's proposition 1 (MM1) with taxes. (1 mark) d) How can the use of debt financing better align the incentives of managers with the interests of shareholders? (2 marks) c) Milton Industries expects free cash flows of $5 million each year. Milton's corporate tax rate is 30%, and its unlevered cost of capital is 10%. The firm also has outstanding debt of $20 million, and it expects to maintain this level of debt permanently. i) What is the value of Milton Industries without leverage? (1 mark) ii) What is the value of Milton Industries with leverage? (2 marks) iii) Based on your answers in i) and ii), discuss the impact of capital structure on firm value under Modigliani and Miller's proposition 1 (MM1) with taxes. (1 mark) d) How can the use of debt financing better align the incentives of managers with the interests of shareholders? (2 marks)