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(10/8) Farah's Fashions (FF) currently has a debt-to-equity ratio of 0.15 and a total market value of $100 million. FF believes that increasing leverage (by
(10/8) Farah's Fashions (FF) currently has a debt-to-equity ratio of 0.15 and a total market value of $100 million. FF believes that increasing leverage (by taking on debt and repurchasing ain equal dollar amount of shares) will increase firm value; consequently, FF has set a target debt-to- equity ratio of 0.3, which they plan to maintain permanently. If FF's marginal tax rate is 30%, then present value of the tax shield it will create
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