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Company Q has EBIT of $30,000. Its debt has an 8% coupon rate and a market value of of $150,000. EBIT is expected to continue
Company Q has EBIT of $30,000. Its debt has an 8% coupon rate and a market value of of $150,000. EBIT is expected to continue at this level forever, and its debt is also perpetual. If Company Q were all equity financed, its cost of equity would be 12%. Company Q has a 30% corporate tax rate. Company Q's investors have a 20% tax rate on interest income and a 12% tax rate on equity income. What is the value of Company Q?
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