Considering stock investment in one of two firms

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Reference no: EM131589553

You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $13.5 million. NoEquity, Inc., finances its $75 million in assets with $74 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $75 million in assets with no debt and $75 million in equity. Both firms pay a tax rate of 30 percent on their taxable income.

Reference no: EM131589553

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