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Explain homemade leverage and why it matters

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Question 1: Maestro Frozen Foods expects to earn $365,000 in perpetuity before interest and taxes from its line of gourmet TV dinners. The company has a debt to assets ratio of 40%. the cost of debt is 10%. if the company had no debt, its cost of capital would have been 15%. the firm's tax rate is 30%. what is the value of the firm? The value of its equity? The required rate of return on equity. The weighted average cost of capital?

Question 2: Explain homemade leverage and why it matters.

Question 3: Based on M&M without taxes and with taxes, how much time should a financial manager spend analyzing the capital structure of their firm? How about based on the static theory?

Reference no: EM132459147

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