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What is the cost of equity and WACC of firms

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Question - MEL and MDL are two firms in the same line of business and also have almost the same size. But they differ in the way they are financed. MDL has a debt of Rs.400 crore while MEL is free from debt. The cost of debt is 15%. Find out the value of the firm assuming tax of 35%, EBT level of 275 crore, and cost of equity 20% under net income approach. Also find the value of the MDL, the levered firm under the net operating income approach. What is the cost of equity and WACC of firms under NI and NOI approaches?

Reference no: EM132996981

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