Compute the value of magnum

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Reference no: EM131327752

Magnum Enterprises has net operating income of $5 million. There is $50 million of debt outstanding, with a required rate of return of 6 percent.

The required rate of return on the industry is 12 percent. The corporate tax rate is 40 percent. There are corporate taxes but no personal taxes.

Compute the value of Magnum, assuming that the present value of bankruptcy costs are $10 million.

Reference no: EM131327752

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