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An all equity firm has a required return on its equity of 15%, has 10 million shares outstanding, and pays no taxes. The shares are currently trading at $6.00 each. The firm is planning to borrow $9 million at 5% interest rate and use the borrowed funds to buyback a portion of its equity. find out the new value of the firm and the new required return on its equity if it goes through with the capital structure change.

Basic Finance, Finance

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  • Reference No.:- M924049

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