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1. A Company expects a net income of 300,000dhs. It has 500,000dhs, 9 % debentures.The equity capitalization rate of the comp

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Answer #1
1) Net Income 300000
Interest at 9% of 500,000 45000
Net income after interest 255000
Ke 10%
Equity value 2550000
Debt value 500000
Total value of firm 3050000
2) Years CF Cumul CF
Initial CF -30000 -30000
1 4000 -26000
2 7000 -19000
3 11000 -8000
4 14000 6000
5 8000 14000
6 4000 18000
So pay back happens in 4 year 3.571
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