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Business, 05.05.2020 03:59 borbin

Dot expects to earn $300,000 in perpetuity before interest and taxes. The company has a debt to value ratio of 30%. The cost of debt is 10%. If the company had no debt, its cost of capital would have been 15%. The firm’s tax rate is 30%. a) What are the value of Dot’s equity and the (firm) value of Dot? b) What is the cost of capital? c) What is the required rate of return on equity?

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