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Assume there is a 25% chance that Amgens EBIT will equal $100 million, a 45% chance that Amgens EBIT will equal $250 million, and a
Assume there is a 25% chance that Amgens EBIT will equal $100 million, a 45% chance that Amgens EBIT will equal $250 million, and a 30% chance that Amgens EBIT will equal $400 million. Assume also that the personal tax rate on equity income equals 15%, that the personal tax rate on interest income equals 35%, and that the corporate tax rate equals 40%. a. Determine Amgens tax-optimal capital structure. b. How would your answer change if the tax rate on interest income rises? (Check figure: Optimal interest = 250 million)
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