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A number of European countries have adopted a flat tax. These countries (as of 2007) include Estonia with a rate of 24%, Latvia 25%, Russia 13%, Ukraine 13%, Slovakia 19%, and Romania 16%, Georgia 12%, and Serbia 14%. As an aside, Slovakia collected 10% more income tax than expected and the number of new firms registering in Slovakia jumped 12%. What impact do you think a flat tax has on the cost of capital for firms raising money in the flat-tax countries? Will it have further-reaching ramifications? Has the country you selected considered a flat tax? Explain.

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