14.7. Assume the corporate tax rate is 50 percent, AAA corporate bonds are trading at a yield...

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14.7. Assume the corporate tax rate is 50 percent, AAA corporate bonds are trading at a yield of 9 percent, and municipal bonds are trading at a yield of 6 percent. How can the shareholders of an AAArated firm gain by increasing the leverage of their firm without increasing the leverage of their personal portfolio? Assume the probability of bankruptcy is zero.

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Financial Markets And Corporate Strategy

ISBN: 9780071157612

2nd Edition

Authors: Mark Grinblatt, Sheridan Titman

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