An otherwise identical but levered firm

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An unlevered firm has a value of $700 million. An otherwise identical but levered firm has $130 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax rate is 40%, use the MM model with corporate taxes to determine the value of the levered firm. Enter your answer in millions.

Reference no: EM13883388

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