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Assume that the value of a firm in a M-M world without taxes is 2000. Assume that the corporate tax rate is as proposed by

Assume that the value of a firm in a M-M world without taxes is 2000. Assume that the corporate tax rate is as proposed by the administration, i.e., 0.15 (15%). Suppose further that a tax of 20% is levied on equity returns and the same tax rate of 20% is levied on interest income. 


What is the value of a levered firm with 1000 debt?


What is the optimal capital structure?

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