Question
Suppose the firm has a value of $233,142.86 when it is all equity financed. Now assume the firm issues $44,000 of debt paying interest of
Suppose the firm has a value of $233,142.86 when it is all equity financed. Now assume the firm issues $44,000 of debt paying interest of 9% per year and uses the proceeds to retire equity. The debt is expected to be permanent.
What will be the value of the firm? Enter your answer rounded to two decimal places.
What will be the value of the equity after the debt issue? Enter your answer rounded to two decimal places.
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Financial Markets and Institutions
Authors: Jeff Madura
11th Edition
1133947875, 9781305143005, 1305143000, 978-1133947875
