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ABC has accumulated $23 million in assets, operating income of$1.75 million. The tax rate is 35%. It finances 25%, 50% and 75% ofits assets with debt at costs of 9%,10& and 12% respectively.Discuss your results. a. Determine the ROE under three models. b.Which capital structure is best and why? c. What if EBIT increasesby 10%, which capital structure is best?
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