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What is the value of the firm

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Question - Tool Manufacturing has an expected EBIT of $45,000 in perpetuity and a tax rate of 35 percent. The firm has $80,000 in outstanding debt at an interest rate of 9 percent, and its unlevered cost of capital is 14 percent. What is the value of the firm according to M&M Proposition-I with taxes? Should Tool change its debt- equity ratio if the goal is to maximize the value of the firm? Explain.

Reference no: EM132572174

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