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River Cruises is all-equity financed with 40,000 shares. It now proposes to issue $150,000 of debt at an interest rate of 10% and to use
River Cruises is all-equity financed with 40,000 shares. It now proposes to issue $150,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 15,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar increase in the combined after-tax income of its debt holders and equity holders if profits before interest are: (Do not round intermediate calculations)
a.) $65,000 = (???? Increase in Cash flow)
b.) $90,000 = (???? Increase in Cash flow)
c.) $165,000 = (???? Increase in Cash flow)
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