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Suppose that 60% of companys total assets of 800 million euros are financed with debt capital. Its cost of debt is 6% before taxes, and
Suppose that 60% of companys total assets of 800 million euros are financed with debt capital. Its cost of debt is 6% before taxes, and its cost of equity capital is 10%. Companys last years pre-tax income was 25 million euros and the tax rate was 20%. What was this companys residual income during the last year? Explain in one sentence, what does the calculated residual income imply.
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