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Farmington Company can borrow at 6 . 5 percent. The company currently has no debt and the cost of equity is 1 0 . 9

Farmington Company can borrow at 6.5 percent. The company currently has no debt and the cost of equity is 10.9 percent. The current value of the firm is $605,000. The corporate tax rate is 22 percent. What will the value be if the company borrows $320,000 and uses the proceeds to repurchase shares? What is the value of the firm?

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