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ABC Corp has 1,000,000 shares outstanding, each selling at $10, no debt, and 15% cost of equity. The firm decides to borrow $5 million in
"ABC Corp has 1,000,000 shares outstanding, each selling at $10, no debt, and 15% cost of equity. The firm decides to borrow $5 million in perpetual debt at 10% interest rate and use the proceeds to repurchase shares. The marginal tax rate is 40%. What is the value of the firm after the capital structure change?"
"$5,000,000 " | ||
"$10,000,000 " | ||
"$12,000,000 " | ||
"$15,000,000 " |
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