Firm Valuation
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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 rate is 40%. A similar firm with no debt has a cost 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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Dear Customer,
The answer is $587,500 (with a small approximation).
I have attached the document with the steps in proper formatting.
MM - Firm Valuation
Your firm has debt worth 200,000, with a yield ...
Purchase this Solution
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