The value of the firm is $50 million
The given parameters are:
EBIT = $10 million
Tax Rate, Tc = 40%
Unlevered cost of capital, RU = 12%
The value of the firm is calculated as:
Value = EBIT*(1 - Tc)/Ru
This gives
Value = 10 million *(1 - 40%)/12%
Evaluate the expression
Value = 50 million
Hence, the value of the firm is $50 million
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