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The JudyLee has EBIT of $350,000 and market value debt of $600,000 outstanding with a 12% coupon rate. John has a 30% corporate tax rate.

The JudyLee has EBIT of $350,000 and market value debt of $600,000 outstanding with a 12% coupon rate. John has a 30% corporate tax rate. The cost of equity for an all equity firm would be 10%.

a. Determine the value of the firm.

b. Investors face a 15% tax rate on debt receipts and a 15% rate on equity. Determine the value of the firm.

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