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how to get to the answer of optimal debt is worth 30? 20. An unlevered firm decides to issue perpetual debt which is worth either
how to get to the answer of optimal debt is worth 30?
20. An unlevered firm decides to issue perpetual debt which is worth either {0,10,20,30,40 The tax rate is 30%. The PV of default costs for these different levels of debt are given below. The firm won't change its capital structure in the future. If the firm defaults, then creditors recover nothing therefore the debt cash flows exists of only coupon payments. a. What is the PV of the tax benefits of debt given the different debt levels? b. What is the optimal amount of debt issued Step by Step Solution
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