Marpor Industries has no debt and expects to generate free cash flows of $16 million each year. Marpor believes that if it permanently increases its level of debt to $40 million, the risk of financial distress may cause it to lose some customers and receive less favorable terms from its suppliers. As a result, Marpor's expected free cash flows with debt will be only $15 million per year. Suppose Marpor's tax rate is 35% , the risk-free rate is 5% , the expected return of the market is 15% , and the beta of Marpor's free cash flows is 1.1 (with or without leverage). a. Estimate Marpor's value without leverage. b. Estimate Marpor's value with the new leverage.
Answers (1)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Marpor Industries has no debt and expects to generate free cash flows of $16 million each year. Marpor believes that if it permanently ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right? a. the expected rate of return on U. S. assets rises b. the exchange rate falls c.
Answers (1)
The Organisation for Economic Co-operation and Development's requirement that personal data collected should be accurate, complete, current, and relevant to the purpose for which it is used is based on which principle?
Answers (1)
Consider the above statement of cash flows. Which of the following is true of AOS Industries' operating cash flows? A. It sold more inventory than it bought. B. It collected more cash from its customers than they charged. C.
Answers (1)
The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 10% (paid annually) is 5.7%. a.
Answers (1)
Sales of services, $122,000, of which $36,600 was on credit. collected on accounts receivable, $25,000. issued shares of common stock in exchange for $13,000 in cash. paid salaries, $44,500 (of which $8,500 was for salaries payable).
Answers (1)
New Questions in Business
After the end of the 2022 fiscal year but before financial statements were issued, Palladin Company learned that an arbitrator had made a $15 million judgment in a litigation case against it.
Answers (1)
When a home is added to the assessment role in an special improvement district, what must brokers disclose to all potential buyers?
Answers (1)
Rumpelstiltskin, an imp in a Grimm Brothers fairy tale, could spin straw into gold. We would call this a (n) a. capability. b. tangible resource. c. intangible resource d. useful skill.
Answers (2)
What does it mean when you have demand for a good or service a. you can afford the good but may be unwilling to buy it. b. you want the good but may not have the money for it. c. you are able to buy the good but not at the given price d.
Answers (1)
Schedule of Cash Collections of Accounts Receivable OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers.
Answers (1)