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Consider an economy with distress costs and corporate tax rates. Consider further a firm with EBIT = 1 0 0 constant, rA = 1 0

Consider an economy with distress costs and corporate tax rates. Consider further a firm with EBIT =100 constant, rA =10%, rD =5%, distress costs 0.0005*D^2, corporate tax rate tau =0.3. What is the optimal leverage ratio (D/V)?

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