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Rozanski Co. is currently all-equity financed and has a value of $300,000.They are planning to issue $100,000 of permanent debt, and using the proceeds to
Rozanski Co. is currently all-equity financed and has a value of $300,000.They are planning to issue $100,000 of permanent debt, and using the proceeds to repurchase equity.If they issue the debt, they will have a 20 percent probability of undergoing financial distress in 3 years, which will cost the company $120,000.With a tax rate of 25 percent and a discount rate of 10 percent, what will be the value of the company if it issues the debt?
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