Business, 15.04.2020 03:04 cuscuecer16

Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each company expects to earn $12.6 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 $74 million and costs 5 percent per year. Levered has 3.2 million shares outstanding that sell for $90 per share. Unlevered has no debt and 4.9 million shares outstanding, currently worth $73 per share. Neither firm pays taxes. What is the value of each company's equity?

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Levered, Inc., and Unlevered, Inc., are identical in every way except their capital structures. Each...

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