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Now suppose that the tax rate is 30% and Lever Co. has 10,000 shares outstanding. Further assume that the company wants to reduce the debt
Now suppose that the tax rate is 30% and Lever Co. has 10,000 shares outstanding. Further assume that the company wants to reduce the debt level to $100,000 by issuing new shares. The company still generates EBIT $75,000. c). What is the firm value (sum of debt and equity) of Lever Co. before (2%) and after (2%) the reduction of debt level? How many shares the company should beekissputes)? (Assume the company can buy back non-integer numbers of shares.) Other things being held equal, is it wise for Level Co. to reduce its debt level and why (3%)? In real world, suggest two potential motivations for a firm to reduce debt level (4%)? Question Four (25%) and stool E are trading in the stock Now suppose that the tax rate is 30% and Lever Co. has 10,000 shares outstanding. Further assume that the company wants to reduce the debt level to $100,000 by issuing new shares. The company still generates EBIT $75,000. c). What is the firm value (sum of debt and equity) of Lever Co. before (2%) and after (2%) the reduction of debt level? How many shares the company should beekissputes)? (Assume the company can buy back non-integer numbers of shares.) Other things being held equal, is it wise for Level Co. to reduce its debt level and why (3%)? In real world, suggest two potential motivations for a firm to reduce debt level (4%)? Question Four (25%) and stool E are trading in the stock
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