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Question 2. Duplex Corporation consists entirely of two business units, ABC and XYZ. ABC has a constant EBIT of $200 per year forever and a

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Question 2. Duplex Corporation consists entirely of two business units, ABC and XYZ. ABC has a constant EBIT of $200 per year forever and a beta of assets of 1.2.XYZ has a constant EBIT of $400 per year forever and a beta of assets of 0.8. The corporate tax rate is 25%, the risk free rate of return is 2%, and the market risk premium is 10%. (a) What is the unlevered value of Duplex Corporation (V)? (Hint: Find the value of each division) (b) What is the required return on assets for Duplex Corporation (E [FA])? Assume that the EBIT for both divisions remains constant forever. (c) Suppose Duplex sets its debt-to-equity ratio to 0.2. What is the levered value of Duplex Corporation (V.) if its beta of debt is equal to 0

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