Chapter 18 question 9: Bombay Company's book and market value balance sheets are as follows: (NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value): Book Values Market Values NWC 200 500 D NWC 200 500 D LTA 2,300 2,00 E LTA 2,800 2,500 E 2,500 2,500 V 3,000 3,000 V According to MM's Proposition I corrected for taxes, what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 21 percent marginal corporate tax rate.

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Explanat 9 Bombay Company's book and market value balance sheets are as follows: (NWC = net working capital; LTA = long term assets; D = debt; E= equity; V = firm value): Market 1/1 Book Values Values points awarded NWC 200 500 D NWC D 500 2,500 E Scored LTA 2,300 200 2,800 3,000 2,00 ELTA 2,500 2,500 V 3,000 V eBook References According to MM's Proposition I corrected for taxes, what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 21 percent marginal corporate tax rate