Running Deere firm is considering a target capital structure 45% debt and 55% equity. The...

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Accounting

Running Deere firm is considering a target capital structure 45% debt and 55% equity. The cost of equity for an unlevered firm of Running Deere is 12% and the before tax cost of new debt issued is constant at 8%.
(a) Calculate the Weighted Average Cost of Capital (WACC) for the Levered Firm assuming the corporate tax rate is 40%
(b) Calculate the Market Value of Levered Firm and the Market Value of Debt from Levered Firm if the operating income is $12,000,000 and corporate tax rate is 40%

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