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Business, 17.06.2021 03:40 godstruelove122

Companies U and L are identical in every respect except that U is unlevered and L has a debt of $10 million with the cost of debt rd being 5%. Assume that (1) all the MM assumptions are met, (2) all the firms are subject to a 40% tax rate, (3) EBIT is $2 million and (4) the unlevered cost of equity rsu is 10%. Based on MM model with corporate tax, what is the equity of the levered firm, i. e. what is SL

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