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The BenSmith Company has EBIT of $250,000 and market value debt of $250,000 outstanding with...

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Finance

The BenSmith Company has EBIT of $250,000 and market value debt of $250,000 outstanding with a 15% coupon rate. The cost of equity for an all-equity firm would be 20%. Zercon has a 36% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 25% rate on equity. Determine the value of Zercon.

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