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As a consultant to First Responder Inc., you have obtained the following data (dollars in millions). The company plans to pay out all of its

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As a consultant to First Responder Inc., you have obtained the following data (dollars in millions). The company plans to pay out all of its earnings as dividends, hence g = 0. Also, no net new investment in operating capital is needed because growth is zero. The CFO believes that a move from zero debt to 45.0% debt would cause the cost of equity to increase from 10.0% to 13.0%, and the interest rate on the new debt would be 7.0%. What would the firm's total market value be if it makes this change? Hints: Find the FCF, which is equal to NOPAT = EBIT(1 - T) because no new operating capital is needed, and then divide by (WACC - g). Do not round your intermediate calculations. $740 Tax rate 25.0% Oper. income (EBIT) New cost of equity (rs) Interest rate (rd) 13.00% New Wd 45.0% 7.00% O a. $5,388 million O b. $5,834 million O c. $7,779 million O d. $7,184 million O e. $6,520 million

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