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River Cruises is all-equity-financed with 41,000 shares. It now proposes to issue $160,000 of debt at an interest rate of 12% and to use the
River Cruises is all-equity-financed with 41,000 shares. It now proposes to issue $160,000 of debt at an interest rate of 12% and to use the proceeds to repurchase 16,000 shares. Suppose that the corporate tax rate is 21%. 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.)
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