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Use these facts for this and the following three questions. A company is financed equally by $1 million in debt and $2 million in equity.

Use these facts for this and the following three questions.

A company is financed equally by $1 million in debt and $2 million in equity. The cost of debt is 4%, and the cost of equity is 11%. The company now makes a further $350,000 issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to 7%. Assume the firm pays no taxes.

How much debt does the company now have, to the nearest thousand dollars? $(XXXX),000

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