Celmax Corporation expects free cash flow this year of $7.36 million and a future growth rate of 4% per year. The firm currently has $30 million in debt outstanding. This leverage will remain fixed during the year, but at the end of each year, Celmax will increase or decrease its debt to maintain a constant debt-equity ratio. Celmax pays 5% interest on its debt, pays a corporate tax rate of 40%, and has an unleveraged cost of capital of 12%.

Estimate Celmax's value with this leverage policy

Answer rating: 100% (QA)

Value without leverage 736M012004 92 Million int... View the full answer