Walkrun Inc. is unlevered and has a value of $700 billion. An otherwise identical but levered firm finances 40% of its capital structure with debt at a 6% interest rate. No growth is expected. Assume the corporate tax rate is 25%. Use the MM model with corporate taxes to determine the value of the levered firm. Enter your answer in billions. For example, an answer of $1 billion should be entered as 1, not 1,000,000,000. Round your answer to the nearest whole number.

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2. Quillpen Company is unlevered and has a value of $35 billion. An otherwise identical but levered firm finances 25% of its capital structure with debt. Under the MM zero-tax model, what is the value of the levered firm? Enter your answer in billions. For example, an answer of $1 billion should be entered as 1, not 1,000,000,000. Round your answer to the nearest whole number.

Answer rating: 100% (QA)

To calculate the value of the levered firm using the ModiglianiMiller MM ... View the full answer