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Crown Inc. is a pure equity firm. Firm decides to recapitalize to take advantage of tax shield. Firms marginal tax rate is 40%. After a
Crown Inc. is a pure equity firm. Firm decides to recapitalize to take advantage of tax shield. Firms marginal tax rate is 40%. After a substantial borrowing, firms cost of equity goes up to 10%. Assuming that firms asset beta is 0.9, risk free rate is 2%, and EMRP is 5%, firms post recapitalization debt ratio is closest to 56% 72% None of the above 42% 129%
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