Haricot Corp. and Pinto Corp. both havepre-tax profits of $100 million. Haricot is financed solely by equity,

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Haricot Corp. and Pinto Corp. both havepre-tax profits of $100 million. Haricot is financed solely by equity, while Pinto has issued $150 million of 8% debt. If the corporate tax rate is 35%:

a. How much tax does each company pay?

b. What is the total payout to investors (debtholders plus shareholders) of each company?

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Fundamentals of Corporate Finance

ISBN: 978-1259722615

9th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Question Posted: Jun 24, 2017 08:58 AM

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Haricot Corp. and Pinto Corp. both havepre-tax profits of $100 million. Haricot is financed solely by equity,

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