Question: Consider a firm financed using long-term debt with a value of $100 million and a before-tax cost of 4%. The firm also has 10 million

Consider a firm financed using long-term debt with a value of $100 million and a before-tax cost of 4%. The firm also has 10 million shares outstanding at a price of $40/share. Assume the firm's cost of equity is 8% and its corporate tax rate is 20%.
a. What is the total value of the equity? What is the total firm value?
b. What is the firm's WACC?

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a The total value of equity can be calculated as follows Total value of equity ... View full answer

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