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All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian's $418 million debt is9 percent, and the company's tax rate is 30 percent. The cost of All-Canadian's equity capital is 10 percent. Moreover, the market value of the company's equity is $627 million. (The book value of All-Canadian's equity is $442 million, but that amount does not reflect the current value of the company's assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian's three divisions. Before-Tax Operating Current Total Division Pacific Plains Atlantic LiabilitiesAssets Income $12 42 45 $ 68 318 498 10
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