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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
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?
a. What is the total value of the equity? What is the total firm value?
b. What is the firm's WACC?
Expert Answer
a. The total value of equity can be calculated as follows: Total value of equity = Numbe
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Related Book For 
Financial Management Theory and Practice
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
ISBN: 978-1305632295
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