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Question 1 1 Perez & Perez ( P&P ) , based in a country currently without any taxes, has an annual operating income ( EBIT
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Perez & Perez P&P based in a country currently without any taxes, has an annual operating income EBIT of million in
perpetuity. The company is currently percent equity financed and, based on its current capital structure, its shareholders have a
required rate of return of percent. & is considering issuing million in debt and using the proceeds to repurchase common
shares. The debt will be issued at par and will have an percent coupon. If the country implements a percent corporate tax
rate and Modigliani and Miller's Propositions I and II with taxes apply, the value of the firm before the debt issuance and share
repurchase is closest to:
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