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5 PROBLEMS 6 Continue with the IHA example from Problem 6. 7 8 Assume the initial facts of the problem: R(Rd)-6%, EBIT-$1.6 million, R(Reu-11%. Now

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5 PROBLEMS 6 Continue with the IHA example from Problem 6. 7 8 Assume the initial facts of the problem: R(Rd)-6%, EBIT-$1.6 million, R(Reu-11%. Now assume 9 that a 40 percent corporate tax rate exists. Find the new market values for IHA with zero debt and 10 with $6 million of debt, using the MM with taxes formula. 11 12 ANSWER 13 D 14 EBIT 15 T 16 R(Reu) 17 VU 18 19 D 20 VL 21 22 23 24 25 26 27 28 29 30 31 32 33 134

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