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You are the manager of an unlevered firm whose market value is $1,400,000. You are considering issuing $450,000 in debt and using these funds to
You are the manager of an unlevered firm whose market value is $1,400,000. You are considering issuing $450,000 in debt and using these funds to purchase an equal amount of equity. The corporate tax rate is 21%, and the stock holders and bond holders face personal tax rates of 15% and 40% respectively. Use the Miller (1977) Model to estimate the value of the equity of the relevered firm
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