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Dylan expects an EBIT of RM10,000 every year forever. Dylan can borrow at 7 percent. Suppose Dylan currently has no debt, and its cost of

Dylan expects an EBIT of RM10,000 every year forever. Dylan can borrow at 7 percent. Suppose Dylan currently has no debt, and its cost of equity is 12 percent. If the corporate tax is 35 percent, what is the value of the firm? What will the value be if Dylan borrows at

RM33,000 and uses the proceeds to purchase stock? (5 marks)

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