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River Cruises is all-equity-financed with 59,000 shares. It now proposes to issue $340,000 of debt at an interest rate of 12% and to use the
River Cruises is all-equity-financed with 59,000 shares. It now proposes to issue $340,000 of debt at an interest rate of 12% and to use the proceeds to repurchase 34,000 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.) Increase in Cash Flow a. $ b. $ 84.000 109,000 184,000 c. $
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