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Consider two firms, Firm X and Firm Y, that have identical assets that generate identical cash flows. Firm X is an all-equity firm, with 0.5
Consider two firms, Firm X and Firm Y, that have identical assets that generate identical cash flows. Firm X is an all-equity firm, with 0.5 million shares outstanding that trade for a price of $32 per share. Firm Y has 2.5 million shares outstanding and $7 million in debt at an interest rate of 5%. According to MM Proposition, what should be the market value for Firm Y (in million dollars)?
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