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Determine the value of the firm for johnsmith

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Reference no: EM132964957

The JohnSmith has EBIT of $70,000 and market value debt of $100,000 outstanding with a  9% coupon rate. John has a 35% corporate tax rate. The cost of equity for an all equity firm would be 14%.

Problem a. Determine the value of the firm.

Problem b. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of the firm.

Reference no: EM132964957

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