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Assume the firm funds itself with full equity issuance and its market value $1,000,000. The share holders of the firm want to increase leverage and

  1. Assume the firm funds itself with full equity issuance and its market value $1,000,000. The share holders of the firm want to increase leverage and issue debt of 75% from the MV of the firm
    1. What is the BE EBIT?
    2. IF EBIT is higher than the BE EBIT would you recommend issuing the debt?
    3. Will the change in Capital structure affect the EBIT flow of the firm?
    4. How does this connected with Miller Modiglani statement?

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