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xyz has total assets of $3,000,000 financed by debt of $2,000,000 and equity capital of $1,000,000. The pretax cost of debt is 6% and the
xyz has total assets of $3,000,000 financed by debt of $2,000,000 and equity capital of $1,000,000. The pretax cost of debt is 6% and the cost of equity capital is given at 10%. XYZ has pretax income(before deduction of interest expense) of $300,000 and is taxed at 40%. Calculate residual income in year 1 (after deducting an equity charge)
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