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Assume that MM's perfect capital market conditions are met. Consider two firms, Firm X and Firm Y, which have identical assets that generate identical cash
Assume that MM's perfect capital market conditions are met. Consider two firms, Firm X and Firm Y, which have identical assets that generate identical cash flows. Both firms are expected to generate a free cash flow of $1,100 next year and close their operations afterward. Firm X is an unlevered firm and has 100 shares, each worth $10. Firm Y has 100 shares (each worth $5) and $500 in debt at 5%. Question 8: What are Firm X and Firm Y's overall cost of capital
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