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Suppose that your firm's current unlevered value, VU, is $900,000, and its marginal corporate tax rate is 21 percent. Also, you model the firm's PV
Suppose that your firm's current unlevered value, VU, is $900,000, and its marginal corporate tax rate is 21 percent. Also, you model the firm's PV of financial distress as a function of its debt level according to the relation: PV of financial distress = 900,000 .4(D/VU)2. What is the firm's levered value if it issues $300,000 of perpetual debt to buy back stock?
a $792,000
b$851,750
c$923,000
d$820,000
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