The assets of Indigo Books will be worth $ 550M with 75 % probability and $ 200M with 25 % probability The firm will not generate cash flows thereafter . The risk - free rate is 3 % and the discount rate on the assets is 6 % . Suppose Indigo has debt due in one year of $ 150M . If MM holds , implying a perfect market , what is the value of Indigo's equity

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In a perfect market according to ModiglianiMiller MM theorem the capital structure does not aff... View the full answer