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Should firm change debt-equity ratio if goal is to maximize

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A.Anand Furnitures has an expected EBIT of INR 35000 in perpetuity and a tax rate of 25 percent. The firm has INR 70000 in outstanding debt at an interest rate of 9 percent, and its unlevered cost of capital is 14 percent.

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Question i. Find firm value according to MM Proposition with taxes?

Question ii. Should firm change its debt-equity ratio if the goal is to maximize the value of the firm? Explain.

Reference no: EM132538685

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