There are no corporate taxes and no costs offinancial distress. ABC corporation has $1,000,000 ofcomrnon stock and
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There are no corporate taxes and no costs offinancial distress. ABC corporation has $1,000,000 ofcomrnon stock and $9,000,000 of.08 debt (market value).
Assume that .20 ofan unlevered firm (XYZ) with identical operating characteristics can be purchased for $2,800,000.
What investment strategy do you recommend ifthe investor wants to invest in one ofthe two firms?
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Mario Alvarez
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