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ACF is a textile company that has operating earnings (EBIT) of $50 million. It employs $200 million capital that comes 60% from debt and the

ACF is a textile company that has operating earnings (EBIT) of $50 million. It employs $200 million capital that comes 60% from debt and the rest, 40% from equity. Its cost of debt is 5% and tax rate is 35%. Estimate the EVA if ACF's beta is 1.5, the market risk premium is 6% and the risk free interest rate is 3%. Increase the parameters by 10% (one at a time) and estimate the effect of the change on EVA. Please explain your findings.

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