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Lambda Ltd has $100 million of perpetual debt outstanding with an interest cost of 9%. The company is currently subject to a corporate tax rate
Lambda Ltd has $100 million of perpetual debt outstanding with an interest cost of 9%. The company is currently subject to a corporate tax rate of 30%. Following national elections, the incoming government unexpectedly passes a law that lowers the corporate tax rate for all companies to 25%. According to Modigliani and Miller what will be the most likely immediate change in the market value of the company?
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