Problemcede amp co can borrow at 1050 percent cede, Ask an Expert

Accounting

Problem:

Cede & Co. can borrow at 10.50 percent. Cede currently has no debt, and the cost of equity is 17.00 percent. The current value of the firm is $658,000. The corporate tax rate is 38 percent.

Required:

Question: What will the value be if Cede borrows $221,000 and uses the proceeds to repurchase shares?

$879,000
$795,020
$471,040
$387,060
$741,980

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167123

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