1 when a firm issues permanent debt the value of all its, Ask an Expert

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1. When a firm issues permanent debt, the value of all its securities:

Does not change

Increases by the present value of the tax shield

Increases by the annual interest tax shield

2. Suppose that the weighted average cost of capital of Fett & Co. is 10%. If Fett has a capital structure with equal amounts of debt and equity, a before-tax cost of debt of 5%, and a marginal tax rate of 20%, then its cost of equity capital is closest to:

14%

16%

12%

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92860993

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