Question
The market value of a company with debt (company A) is 200 million. If the value of an identical firm, which is financed only with
The market value of a company with debt (company A) is 200 million. If the value of an identical firm, which is financed only with equity (company B) is 180 million, the corporate tax rate is 20%, and there are no more frictions in the economy, what is the 3 market value of debt of company A if this debt is perpetual, the cost of this debt is 10%, and the coupon rate is 5%?
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Financial and Managerial Accounting
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
11th Edition
9780538480901, 9781111525774, 538480890, 538480904, 1111525773, 978-0538480895
