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:

Forbearance

A creditor's agreement to postpone, delay, or withhold legal action despite the debtor's failure to meet the terms of the contract.

Statute Of Limitations

A federal or state statute setting the maximum time period during which a certain action can be brought or certain rights enforced.

Consideration

Something of value exchanged between parties in a contract, which is required for the agreement to be legally binding.

Estopped

Barred, impeded, or precluded.