Question
Firm A and Firm B are identical companies with the same FCFs and risks. However, Firm A is 100% equity financed and Firm B is
Firm A and Firm B are identical companies with the same FCFs and risks. However, Firm A is 100% equity financed and Firm B is 50% equity, 50% debt. If the corporate tax rate is 20%, which company do you expect to have a higher enterprise value (enterprise value = market value of equity + market value of debt)?
Firm A
Firm B
Same for A & B
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Financial Management Core Concepts
Authors: Raymond M Brooks
2nd edition
132671034, 978-0132671033
