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Unformatted text preview: (7) Answer: B Given that E/V = 0.45 and E = 58 million 58m/V = 0.45 V = 58m/0.45 Value of firm (V) = $128,888,889 $129 million (8) Answer: A Let x = % of debt. Then 3x = % of equity and 4x = 100% x = 25.0% Equity ratio = 3x = 75.0% (9) Answer: A Expected return on stock = 6% + [1.5(15%  6%)] = 6 + 13.5 = 19.5% (10) Answer: D r e = (4/25) + 0.05 = 21.00%...
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 Spring '10
 Lee
 Debt

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