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River Cruises is all-equity-financed with 43,000 shares. It now proposes to issue $180,000 of debt at an interest rate of 12% and to use the
River Cruises is all-equity-financed with 43,000 shares. It now proposes to issue $180,000 of debt at an interest rate of 12% and to use the proceeds to repurchase 18,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar increase in the combined after-tax income of its debtholders and equityholders if profits before interest are: (Do not round intermediate calculations.) Increase in Cash Flow a. $ 68,000 b S 93.000 c. $ 168,000
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