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What is the present value of basic

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Basic Inc. has constant FCFs of $10M per year. Their unlevered cost of capital is 10%. Basic currently has $20M in debt with an expected return to debtholders of 7%. They plan on reducing the amount of debt in the company by 2% per year, forever. What is the present value of Basic Inc.’s FCFs if the corporate tax rate is 40%?

Using the information from the previous problem,what is the D/E ratio of Basic Inc. today?

Reference no: EM131884347

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