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Companies U and L are identical in every respect, except that U is unlevered while L is levered. Company L has OMR 2,000,000 of 8%
Companies U and L are identical in every respect, except that U is unlevered while L is levered. Company L has OMR 2,000,000 of 8% Debt outstanding.
Assume that all the MM assumptions are met, the tax rate is 50%, EBIT is OMR 600,000 and that equity-capitalization rate for company U is 10%.
What would be value for each firm according to MMs Approach, Calculate L firms cost of Equity and Overall cost of capital of L firm?
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The Essential Controller An Introduction To What Every Financial Manager Must Know
Authors: Steven M. Bragg
2nd Edition
1118169972, 9781118169971
