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A company has $100m equity and no debt. It is also considering adjusting its capital structure through a $20m worth of leveraged buyback which involves

A company has $100m equity and no debt. It is also considering adjusting its capital structure through a $20m worth of leveraged buyback which involves borrowing permanently $20m at an interest rate of 10% and using the fund to repurchase its shares outstanding. The corporate tax rate is 35%. From this information, calculate the increase in firm value due to the tax shield.

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