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6. Assume the MM tax case holds. The market value of a firm that has $400,000 in debt total $1,600,000. The interest rate on debt
6. Assume the MM tax case holds. The market value of a firm that has $400,000 in debt total $1,600,000. The interest rate on debt for this firm is 10 percent, and the marginal tax rate is 40 percent. If the firm were financed by all equity, the required rate of return would be 12 percent. a. What is the firm's EBIT? b. What would be the market value of this firm if it were financed with all equity? c. What is the required rate of return for the stock in the levered firm
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