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Company A and Company B are identical in all respects except for capital structure. Company A has a cost of equity of 20% and

Company A and Company B are identical in all respects except for capital structure. Company A has a cost of equity of 20% and a total value of 4 million. Company B has perpetual debt with an interest rate of 5%. Interest payments each year are 20,000. Taxes are paid at a rate of 25%, but markets are otherwise perfect. What is the value of equity in Company B?

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