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2 9 . Gribble Bug Exterminators are financed by pure equity and expect EBIT to be $ 2 2 , 0 0 0 perpetually, and
Gribble Bug Exterminators are financed by pure equity and expect EBIT to be
$ perpetually, and have a cost of equity of with a tax rate of
Assume that M&M Proposition & hold and there are no bankruptcy costs. What is
the value of the firm under the optimal capital structure? Answer: E
a $
b$
c $
d $
e $
Burns Nuclear Plant is facing bankruptcy and can be liquidated for $ million. If
Burns can restructure and sell off any unprofitable divisions they can manage to
reduce the riskiness of future cash flows and bring their WACC to Burns has
a tax rate of What would the minimum perpetual pretax operating cash flows
have to be for restructuring to be viable? Answer: C
a $
b $
c $
d $
e$
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