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Problem:

Assume the marginal corporate tax rate is 30%. The firm has no debt in its capital structure. It is valued at $100 million.

Required:

Question: What would be the value of the firm if it issued $50 million in perpetual debt and repurchased the same amount of equity?

$65 million
$115 million
$100 million
$150 million

Note: Please show how to work it out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162424

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