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Khan Ltd generates annual cash flows of $255 and is expected to hold infinitely. The company is currently financed with 53 per cent equity and
Khan Ltd generates annual cash flows of $255 and is expected to hold infinitely. The company is currently financed with 53 per cent equity and 47 per cent debt. Your analysis tells you that the appropriate discount rates are 10 per cent for the cash flows, and 9 per cent for the debt. You currently own 10 per cent of the shares. Assume that the M&M Proposition 1 hold. If Khan Ltd. wants to change its capital structure from 53 per cent to 35 per cent equity via debt issue, how much debt should Khan Ltd issue?
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