Question
The free cash flows of MN Company are expected to be $24 million per year for ever. This firm has a permanent debt of $74
The free cash flows of MN Company are expected to be $24 million per year for ever. This firm has a permanent debt of $74 million, and an unlevered cost of capital of 10%. The corporate tax rate is 30%.
Answer the following. (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
What is value of the unlevered company? | $ |
What is MN's cost of equity if the cost of debt is 6%? | % |
What is the firm's weighted average cost of capital (WACC)? | % |
Using the WACC method, what is the value of MN's equity? | $ |
What is the total value of the company? | $ |
Using the adjusted present value method, calculate the effect of leverage on the total value of the firm? | $ |
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