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Jellybean Co, is currently all-equity financed and has a value of $800,000.It is planning to issue $200,000 of permanent debt with an interest rate of
Jellybean Co, is currently all-equity financed and has a value of $800,000.It is planning to issue $200,000 of permanent debt with an interest rate of 7% and use the proceeds to buy back stock.With the debt there is a 15 percent probability of financial distress, in which case the firm will have a present value of $215,000.Given a tax rate of 30 percent, what will be the value of the firm with the debt?
Question 51 options:
$698,750
$712,400
$763,250
$827,750
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