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Consider an all-equity firm and an investor who desires the potential payoffs from a firm that is levered. If the investor's desired capital structure
Consider an all-equity firm and an investor who desires the potential payoffs from a firm that is levered. If the investor's desired capital structure is 40% debt, 60%, equity describe how the investor can achieve this by combining borrowing with an investment in the all-equity firm (assuming the investor can borrow at the same interest rate as the firm). Specify with dollar amounts, assuming all borrowing and lending can be done at an 8% interest rate and the investor plans to invest $10,000.
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