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Garson Corp.is looking at two possible capital structures.Currently,the firm is an all-equity firm with $1.2 million dollars in assets and 200,000 shares outstanding.The market value of each share of stock is $6.00.The CEO of Garson is thinking of leveraging the firm by selling $600,000 of debt financing and retiring 100,000 shares,leaving 100,000 outstanding.The cost of debt is 10% annually,and the current corporate tax rate for Garson is 30%.If the CEO believes that Garson will earn $100,000 per year before interest and taxes,should she leverage the firm? Explain.
Homoscedasticity
The condition in which the variance of the residuals or errors in a regression analysis or statistical model is constant across all levels of the independent variable.
Heteroscedasticity
A condition in regression analysis where the variance of errors or the variability of the dependent variable differs across values of an independent variable.
Variance
A measure of the dispersion representing the average of the squared differences from the mean.
Observation
An act of noting and recording something, typically used in the context of data collection in scientific studies or research.
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