Question 8 Taunton plc exists in a Modigliani and Miller (1958, 1963) world, except that corporate taxes exist at the rate of 20%. The firm's operating income before tax and interest is 400,000 p.a. The cost of capital for an all-equity financed firm in this world is 16% p.a., and the pre-tax market cost of debt is 4% p.a. Taunton plc has debt in its capital structure with a market value of 1.5 million. What is the market value of Taunton plc? ABCDE 2 million 2.3 million 3 million 3.3 million 3.5 million 2