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Baker Corp. has a value of $20 million. Tucci is otherwise identical to Baker Corp., but has $8 million in debt. Suppose that both firms
Baker Corp. has a value of $20 million. Tucci is otherwise identical to Baker Corp., but has $8 million in debt. Suppose that both firms are growing at a rate of 6%, the corporate tax rate is 35%, the cost of debt is 6%, and Baker's cost of equity is 9% (assume r_su is the appropriate discount rate for the tax shield) Use the Modigliani and Miller theory extension for growth to complete the following table
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