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The Miller model begins with the MM model without corporate taxes and then adds personal taxes.

A) True
B) False

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The market value of Firm L's debt is $200,000 and its yield is 9%.The firm's equity has a market value of $300,000,its earnings are growing at a rate of 5%,and its tax rate is 40%.A similar firm with no debt has a cost of equity of 12%.Under the MM extension with growth,what is Firm L's cost of equity?


A) 11.4%
B) 12.0%
C) 12.6%
D) 13.3%
E) 14.0%

F) B) and E)
G) C) and E)

Correct Answer

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