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A manufacturing firm has an expected EBIT of $67,000 in perpetuity and a tax rate of 35 percent. The firm has $130,000 in outstanding debt
A manufacturing firm has an expected EBIT of $67,000 in perpetuity and a tax rate of 35 percent. The firm has $130,000 in outstanding debt at an interest rate of 8 percent, and its unlevered cost of capital is 15 percent. What is the value of the company according to MM Proposition I with taxes? Should the company change its debtequity ratio if the goal is to maximize the value of the company? Explain
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The Palgrave Handbook Of Technological Finance
Authors: Raghavendra Rau, Robert Wardrop, Luigi Zingales
1st Edition
3030651169, 978-3030651169
