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Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax
Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. What is the value of the firm according to MM with corporate taxes?
a. $475,875 b. $528,750 c. $587,500 d. $646,250 e. $710,875
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