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As a financial consultant, you are given the following information about two companies, one levered and one unlevered: Unlevered Levered Before tax operating income $10
As a financial consultant, you are given the following information about two companies, one levered and one unlevered: Unlevered Levered Before tax operating income $10 000 $10 000 Interest on debt 0 $2 500 Cost of capital (WACC) 16% Cost of Equity capital Cost of Debt capital Value of equity $22 500 Value of debt Value of firm Copy the table to your answer sheet and fill in the missing figures. Show the steps you used to calculate them. Assume that the corporate tax rate is 40% and al cash flows are perpetual. As a financial consultant, you are given the following information about two companies, one levered and one unlevered: Unlevered Levered Before tax operating income $10 000 $10 000 Interest on debt 0 $2 500 Cost of capital (WACC) 16% Cost of Equity capital Cost of Debt capital Value of equity $22 500 Value of debt Value of firm Copy the table to your answer sheet and fill in the missing figures. Show the steps you used to calculate them. Assume that the corporate tax rate is 40% and al cash flows are perpetual
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