Mojito Mint Company has a debt–equity ratio of .40. The required return on the company’s unlevered equity is 14 percent, and the pretax cost of the firm’s debt is 8.5 percent. Sales revenue for the company is expected to remain stable indefinitely at last year’s level of $19,000,000. Variable costs amount to 70 percent of sales. The tax rate is 35 percent, and the company distributes all its earnings as dividends at the end of each year
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