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solve question 5 pleasee a model firm in a perfect M&M world decides to experiment with different capital structures. It invests $800 today, and its
solve question 5 pleasee
a model firm in a perfect M&M world decides to experiment with different capital structures. It invests $800 today, and its cashflows tomorrow will be $1400 in a strong economy (e.g. high S&P500), and $900 in a weak economy, both equally likely. The risk-free rate is 5%, and you know that the risk premium for equity in the unlevered firm is 10%.
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