What should be the value of the firm

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Reference no: EM131874195

A firm that generates EBIT of $5M every year has $50M of debt outstanding that pays annual interest at a rate of 6%. The required return on the assets of an otherwise identical unlevered company is 12%.

What should be the value of the firm if it is subject to a corporate income tax rate of 40% and the present value of its expected bankruptcy costs were $10M?

Reference no: EM131874195

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