What is the value of rgr without leverage

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Reference no: EM132208131

Question - Sturm Ruger & Company (RGR) expects free cash flows of $83 million or $67 million each year, with each outcome being equally likely. RGR's corporate tax rate under the new U.S. corporate tax rate is 20%, and its unlevered cost of capital is 10%. The firm also has outstanding debt of $2.0 million and expects to maintain this level of debt permanently. (Show your calculations)

a. What is the value of RGR without leverage?

b. What is the value of RGR with leverage?

Reference no: EM132208131

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