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Would appreciate someone solving this question free rate is 5% and the cost of equity if the company is 100% equity financed is 25%. Assume
Would appreciate someone solving this question
free rate is 5% and the cost of equity if the company is 100% equity financed is 25%. Assume perfect world. a. (4 points) What is the current value of ABC if it is all-equity financed? b. (4 points) What is the (before-tax) cost of debt, rd, if ABCs debt is $60M ? Explain. c. (14 points) What is the (before tax) cost of debt if ABC borrows $78M ? d. (4 points) What is the cost of equity if ABC borrows $78M ? If you have not completed part c) you may assume that rd =7% Draw graphs precisely, indicating pivots or changes in the slope of the curve(s)Step by Step Solution
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