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XYZ is a levered firm with expected perpetual EBIT of $10 million and interest payment of $1.5 million. The cost of capital of the firms
XYZ is a levered firm with expected perpetual EBIT of $10 million and interest payment of $1.5 million. The cost of capital of the firms equity is 17%, and the tax rate is 34%. a. If the current value of the firm is $51.75 million, what is the cost of capital of the firms debt? What would be the value of XYZ if it were an all-equity firm? (consider only the tax-based effect of leverage)
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