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You are considering a stock investment in one of two firms (AllDebt, Incorporated, and AllEquity, Incorporated), both of which operate in the same industry and

You are considering a stock investment in one of two firms (AllDebt, Incorporated, and AllEquity, Incorporated), both of which operate in the same industry and have identical EBITDA of $15.3 million and operating income of $9.5 million. AllDebt, Incorporated, finances its $30 million in assets with $29 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Incorporated, finances its $30 million in assets with no debt and $30 million in equity. Both

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