Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company...

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Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $11.8 million before interest per year in perpetuity, with each company distributing all its earnings as dividends. Levered's perpetual debt has a market value of $66 million and costs 7 percent per year. Levered has 2.4 million shares outstanding that sell for $82 per share. Unlevered has no debt and 4.1 million shares outstanding, currently worth $65 per share. Neither firm pays taxes. What is the value of each company's equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Unlevered Levered Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.4 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.8 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.9 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a- What is the value today of Dietrich's debt and equity? (Do not round intermediate 2. calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Steinberg's CEO recently stated that Steinberg's value should be higher than Dietrich's because the firm has less debt and therefore less bankruptcy risk. Do you agree or disagree with this statement? a-1. Steinberg equity value Steinberg debt value a-2. Dietrich equity value b. Dietrich debt value Risk of bankruptcy affect a firm's value Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $11.8 million before interest per year in perpetuity, with each company distributing all its earnings as dividends. Levered's perpetual debt has a market value of $66 million and costs 7 percent per year. Levered has 2.4 million shares outstanding that sell for $82 per share. Unlevered has no debt and 4.1 million shares outstanding, currently worth $65 per share. Neither firm pays taxes. What is the value of each company's equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Unlevered Levered Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.4 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.8 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.9 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a- What is the value today of Dietrich's debt and equity? (Do not round intermediate 2. calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Steinberg's CEO recently stated that Steinberg's value should be higher than Dietrich's because the firm has less debt and therefore less bankruptcy risk. Do you agree or disagree with this statement? a-1. Steinberg equity value Steinberg debt value a-2. Dietrich equity value b. Dietrich debt value Risk of bankruptcy affect a firm's value