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Determine the value of the levered firm

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Problem - An unlevered firm has a value of $800 million. An otherwise identical but levered firm has $60 million in debt at a 5% interest rate, which is its pretax cost of debt. Its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax rate is 35%, use the MM model with corporate taxes to determine the value of the levered firm.

Reference no: EM132902078

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