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tax rate is 40% 1. Firm X is solely financed by $1 million equity at cost of 10% X wants to raise $0.6 million debt
tax rate is 40%
1. Firm X is solely financed by $1 million equity at cost of 10% X wants to raise $0.6 million debt at cost of 4% and use all of it to buy back outstanding equity. a) In a perfect capital market, what will be its new firm value V, WACC and cost of levered equity ry after the buyback? b) In a capital market with corporate taxes, what will be its new firm value V.. WACC and cost of levered equity Tg after the buyback Step by Step Solution
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