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Total Manufacturing has an expected EBIT of $40,000 per year in perpetuity and a tax rate of 30%. The firm currently has no debt. Its

Total Manufacturing has an expected EBIT of $40,000 per year in perpetuity and a tax rate of 30%. The firm currently has no debt. Its cost of debt is 8% and unlevered cost of capital is 14%. If the firm changes its capital structure by borrowing $80,000 to repurchase the same amount of equity, what should be the value of itsequityunder the new capital structure? Answers below are in $ thousands.

A. 144.0

B. 194.0

C. 200.0

D. 224.0

E. 250.0

F. 274.0

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