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Tabah Manufacturing has an expected EBIT of RM64,000 in perpetuity and a tax rate of 35%. The form has RM95,000 in outstanding debt at an

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Tabah Manufacturing has an expected EBIT of RM64,000 in perpetuity and a tax rate of 35%. The form has RM95,000 in outstanding debt at an interest rate of 8.5%, and its unlevered cost of capital is 15%. What is the value of the firm according to M&M proposition I with taxes? Should the company change its debt-equity ratio if the goal is to maximize the value of the firm? Explain. (9 marks)

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