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The following information for two companies which trade in a Miller and Modigliani world is provided: Investor X holds 1 0 0 shares in Company

The following information for two companies which trade in a Miller and Modigliani world is provided:

Investor X holds

100

shares in Company A

.

1 .

Calculate the WACC for Company A and Company B

.

2 .

Determine if shareholder X is adequately compensated for financial risk.

3 .

Calculate the correct value for company A shares, assuming that company B shares are correctly valued.

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