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Suppose that there are two firms, F and F. F' has the same fundamental risk as F but is incorporated in a country with no

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Suppose that there are two firms, F and F". F' has the same fundamental risk as F but is incorporated in a country with no corporate taxes. F has a leverage of 1 and a cost of debt re = 3.5%. F' has a leverage of 0.5, a cost of debt re = 3% and a required return on equity of 8%. The corporate tax rate is 30%. Estimate rs

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