Question: Lyons has EBIT = $ 5 0 0 , 0 0 0 and its cost of equity is R ( ReU ) = 1 4

Lyons has EBIT = $500,000 and its cost of equity is R(ReU)=14%. Currently Lyons uses no debt financing, but it has been told by an investment bank that it could borrow $500,000, $1,000,000, $1,500,000, or $2,000,000 at a cost of R(Rd)=8%. There are no taxes. Assume that the MM without taxes assumptions hold.

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