Use the Information for the Question(s)below

question 89

Multiple Choice

Use the information for the question(s) below.
Shepard Industries expects free cash flow of $10 million each year.Shepard's corporate tax rate is 21%,and its unlevered cost of equity is 10%.The firm also has outstanding debt of $40 million and it expects to maintain amount of debt permanently.
-The value of Shepard Industries without leverage is closest to:

• A)$114 million.
• B)$50 million.
• C)$100 million.
• D)$64 million.

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Definitions:

U.S. Justice Department

The federal executive department responsible for the enforcement of the law and administration of justice in the United States.

Free Market

An economic system based on supply and demand with little or no government control, where the prices of goods and services are determined freely by the open market.

Reciprocity

A social norm of responding to a positive action with another positive action, fostering mutual benefit and exchanges in relationships or transactions.