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Business, 13.05.2021 22:10 imthebestatcod

Kohwe Corporation plans to borrow $50 million to finance a new investment. The firm will pay interest only on this loan each year, and it will maintain an outstanding balance of $50 million on the loan. Suppose that Kohwe’s corporate tax rate is 25% and expected free cash flows are $10 million each year. Kohwe currently has 5 million shares outstanding, and it has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe’s future free cash flows is 8%. What is Kohwe’s share price today if the investment is financed with debt?

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Kohwe Corporation plans to borrow $50 million to finance a new investment. The firm will pay interes...

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