Question: Aa Aa 2. Adding growth to the model Carlson Co. has a value of $80 million. Baker is otherwise identical to Carlson Co., but has

 Aa Aa 2. Adding growth to the model Carlson Co. has

Aa Aa 2. Adding growth to the model Carlson Co. has a value of $80 million. Baker is otherwise identical to Carlson Co., but has $32 million in debt. Suppose that both firms are growing at a rate of 5%, the corporate tax rate is 37%, the cost of debt is 8%, and Carlson's cost of equity is 13% (assume rsu is the appropriate discount rate for the tax shield). Use the Modigliani and Miller theory extension for growth to complete the following table: Baker Corp. Value of the firm Value of the stock Cost of equity Carlson Co. $80 million $80 million 13%

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