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Business, 03.12.2019 00:31 Daruk

Levered, inc., and unlevered, inc., are identical in every way except their capital structures. each company expects to earn $28.2 million before interest per year in perpetuity, with each company distributing all its earnings as dividends. levered’s perpetual debt has a market value of $83 million and costs 8 percent per year. levered has 1.5 million shares outstanding, currently worth $123 per share. unlevered has no debt and 3.7 million shares outstanding, currently worth $71 per share. neither firm pays taxes. what is the value of each firm?

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