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Tatum can borrow at 7.4 percent. The company currently has no debt and the cost of equity is 11.8 percent. The current value

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Answer #1

Using M&M Proposition I with taxes, the value of the levered firm is:

VL = VU + TCD

VL = $695,000 + 0.25($410,000)

VL = $797,500

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