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Consider the M&M world of corporate taxes. The interest expense is $5 million, the corporate tax rate is 20%, and the discount rate on the

Consider the M&M world of corporate taxes. The interest expense is $5 million, the corporate tax rate is 20%, and the discount rate on the tax shield is 8%. What is the gain to leverage or the value added from issuing debt?

$15 million

$18.5 million

$12.5 million

$7.5 million

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