Like for any other firms, Mega Profit Corporation's corporate tax rate is 32%. Currently, its unlevered cost of capital is 8%. Each year, Mega Profit Corporation expects free cash  flows of $40 million. However, the firm also has outstanding debt of $99.25 million. Actually, it expects to maintain this level of debt permanently. 

a) What is the value of Mega Profit Corporation without leverage?

b) What is the value of Mega Profit Corporation with leverage?

Answer rating: 100% (QA)

a To calculate the value of Mega Profit Corporation without leverage we can use the unlevered cost o... View the full answer