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How much will each company add to its retained earnings

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Question - C&G have EBIT of $20.0M and pay tax at a flat rate of 30%. Red is equity financed and pays $1.2M in dividends while Blue is debt financed and pays 1.2M in interest. How much will each company add to its retained earnings for the year. Explain the difference.

Reference no: EM133129768

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