Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 14%. Milton also has outstanding debt of $25.57 million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without leverage? b. What is the value of Milton Industries with leverage? a. What is the value of Milton Industries without leverage? The value of Milton Industries without leverage is $ million. (Round to two decimal places.) b. What is the value of Milton Industries with leverage? The value of Milton Industries with leverage is $ million. (Round to two decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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**Valuation of Milton Industries**

Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 14%. Milton also has outstanding debt of $25.57 million, and it expects to maintain this level of debt permanently.

### Questions:
a. What is the value of Milton Industries without leverage?
b. What is the value of Milton Industries with leverage?

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### Answer Section:

**a. What is the value of Milton Industries without leverage?**

The value of Milton Industries without leverage is: 
\[
\boxed{\phantom{00}} \text{ million.} \quad (\text{Round to two decimal places.})
\]

**b. What is the value of Milton Industries with leverage?**

The value of Milton Industries with leverage is:
\[
\boxed{\phantom{00}} \text{ million.} \quad (\text{Round to two decimal places.})
\]
Transcribed Image Text:**Valuation of Milton Industries** Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 14%. Milton also has outstanding debt of $25.57 million, and it expects to maintain this level of debt permanently. ### Questions: a. What is the value of Milton Industries without leverage? b. What is the value of Milton Industries with leverage? --- ### Answer Section: **a. What is the value of Milton Industries without leverage?** The value of Milton Industries without leverage is: \[ \boxed{\phantom{00}} \text{ million.} \quad (\text{Round to two decimal places.}) \] **b. What is the value of Milton Industries with leverage?** The value of Milton Industries with leverage is: \[ \boxed{\phantom{00}} \text{ million.} \quad (\text{Round to two decimal places.}) \]
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