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QUESTION
The MCFJ corporation is a firm with regular free cash flows $60,000 and no corporation tax.
The MCFJ corporation is a firm with regular free cash flows $60,000 and no corporation tax. MCFJ uses $300,000 of 10% debt financing, and the equity cost of capital to an unleveled firm in the same risk class is 12%.
1) What is the value of the firm according to MM with corporate taxes?
2) What is the firm's equity cost of capital?
