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Cavo Corporation expects an EBIT of $17,100 every year forever. The company currently has no debt, and its cost of equity is 10 percent. The

Cavo Corporation expects an EBIT of $17,100 every year forever. The company currently has no debt, and its cost of equity is 10 percent. The corporate tax rate is 35 percent.

a. What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value?

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