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In: Finance

A company has an un-leveraged value of 1,000,000 and debt 500,000. If the company is subject...

A company has an un-leveraged value of 1,000,000 and debt 500,000. If the company is subject to a corporate tax rate of 0.35, and investors in the company are subject to a tax rate of 0.05 on equity income and 0.10 on debt income, what is the company's value?

Solutions

Expert Solution

Based on Miller Modigliani proposition with taxes

By formula,

Hence, value of firm is $1,156,944.44


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