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Value of mega profit corporation without leverage

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Reference no: EM132485207

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?

Reference no: EM132485207

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