Compute the apv then compute the capital structure in ratios

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Reference no: EM131241334

Consider financing your firm with $100 debt:

The before-tax return is $280, the investment cost is $200, the tax rate is 30%, the overall cost of capital is 12%, and this debt must offer an expected rate of return of 8.7%. (These are again before-tax opportunity rates of return.)

First compute the APV, then compute the capital structure in ratios, and finally show that the WACC yields the same result.

Reference no: EM131241334

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