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Q7. (6 marks) Kamloops Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35%. The firm has $139,000 in outstanding
Q7. (6 marks) Kamloops Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35%. The firm has $139,000 in outstanding debt at an interest rate of 6.85%, and its unlevered cost of capital is 10.25%. What is the value of the firm according the M&M proposition I with taxes? Should the company change its debt/equity ratio if the goal is to maximize the value of the firm? Please explain. 4
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
7th Edition
0324171730, 978-0324171730
