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C.Now suppose that congress passes a law that eliminates the deductibility of interest for tax purposes. What will be the new value of the firm,other
C.Now suppose that congress passes a law that eliminates the deductibility of interest for tax purposes. What will be the new value of the firm,other things egual? Assume a borrowing rate of 70.0%.(Do not round intermediate calculations. Round your answer to 2 decimal places)
Here are book- and market-value balance sheets of the United Frypan Company: Book-value Balance Sheet Net working capital Long-term assets $ 70 30 $ 50 Debt 50 Equity $ 100 $ 100 Market-Value Balance Sheet Net working capital Long-term assets $ 70 180 $ 250 $ 50 Debt 200 Equity $ 250 Assume that MM's theory holds except for taxes. There is no growth, and the $70 of debt is expected to be permanent. Assume a 32% corporate tax rate a. How much of the firm's market value is accounted for by the debt-generated tax shield? PV tax shield b. what is United Frypan's after-tax WACC if rDebt-74% and rEquity-15.6%? (Do not round intermediate calculations Enter your answer as a percent rounded to 2 decimal places.) WACCStep by Step Solution
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