What is the value of firm and cost of equity for baker co

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Problem

Carlson Co. has a value of $50 million. Baker is otherwise identical to Carlson Co., but has $20 million in debt. Suppose that both firms are growing at a rate of 5%, the corporate tax rate is 35%, the cost of debt is 6%, and Carlson's cost of equity is 9% (assume rsU is the appropriate discount rate for the tax shield). Use the Modigliani and Miller theory extension for growth to complete the following table: (Note: Round your answer up to 2 decimal places.) The value of the firm for Carlson Co. is $50 million, the value of the stock is $50 million, and the cost of equity is 9%. Get the instant assignment help. What is the value of the firm, value of the stock, and cost of equity for baker co?

Reference no: EM133910360

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