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Business, 05.05.2020 06:20 batmanmarie2004

Now that your firm has matured, you are considering adding debt to your capital structure for the first time. Your all-equity firm has a market value of $21 million and you are considering issuing $2 million in debt with an interest rate of 5% and using it to repurchase shares. You pay a corporate tax rate of 40%. Assume taxes are the only imperfection and the debt is expected to be permanent. a) What will be the total value of the firm after the change in capital structure

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