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Remex ( RMX ) currently has no debt in its capital structure. The beta of its equity is 1 . 4 4 . For each
RemexRMX currently has no debt in its capital structure. The beta of its equity is For each year into the indefinite future, Remex's free cash flow is expected to equal $ million. Remex is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a debtequity ratio after the change, and it will maintain this debtequity ratio forever. Assume that Remex's debt cost of capital will be Remex faces a corporate tax rate of Except for the corporate tax rate of there are no market imperfections. Assume that the CAPM holds, the riskfree rate of interest is and the expected return on the market is a Using the information provided, fill in the table below. b Using the information provided and your calculations in part a determine the value of the tax shield acquired by Remex if it changes its capital structure in the way it is considering. Question content area bottom Part a Using the information provided, fill in the table below. Using the information provided above, fill in the table below:Round to three decimal places. DebtEquity Ratio Debt Cost of Capital Equity Cost of Capital Weighted Average Cost of Capital Before change in capital structure NA enter your response here enter your response here After change in capital structure enter your response here enter your response here
RemexRMX currently has no debt in its capital structure. The beta of its equity is
For each year into the indefinite future, Remex's free cash flow is expected to equal
$
million. Remex is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a
debtequity ratio after the change, and it will maintain this debtequity ratio forever. Assume that Remex's debt cost of capital will be
Remex faces a corporate tax rate of
Except for the corporate tax rate of
there are no market imperfections. Assume that the CAPM holds, the riskfree rate of interest is
and the expected return on the market is
a Using the information provided, fill in the table below.
b Using the information provided and your calculations in part
a
determine the value of the tax shield acquired by Remex if it changes its capital structure in the way it is considering.
Question content area bottom
Part
a Using the information provided, fill in the table below.
Using the information provided above, fill in the table below:Round to three decimal places.
DebtEquity Ratio
Debt Cost of Capital
Equity Cost of Capital
Weighted Average Cost of Capital
Before change in capital structure
NA
enter your response here
enter your response here
After change in capital structure
enter your response here
enter your response here
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