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Southern Healthcare and BestWell are for - profit HMOs that operate in Florida and Georgia. Currently, both are identical in every respect except that Southern

Southern Healthcare and BestWell are for-profit HMOs that operate in Florida and Georgia. Currently, both are identical in every respect except that Southern is unleveraged while BestWell has $10 million of 5 percent bonds. Both HMOs report an EBIT of $2 million and pay corporate tax at a rate of 40 percent. The unlevered cost of equity to both firms is 10 percent. Assume that all of the MM assumptions hold. What total value would MM estimate for BestWell? B. Given your answer to the previous question, what is the required rate of return on equity for BestWell?

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