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Assume an M&M world with corporate income taxed at a rate TC = 40%. An all-equity firm has the cost of capital of 10% and

Assume an M&M world with corporate income taxed at a rate TC = 40%. An all-equity firm has the cost of capital of 10% and the value of $100 mil. The firm issues debt and uses the entire proceeds from this sale to repurchase some of its equity. As a result, the firm’s WACC drops to 8%. What is the $ value of the firm’s equity after the repurchase?

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