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WH ltd. is an all-equity firm with the market value of $1000 million. The company is considering changing its capital structure by replacing part of

WH ltd. is an all-equity firm with the market value of $1000 million. The company is considering changing its capital structure by replacing part of its equity with $350 million perpetual debt. The interest rate is 3.2% and the tax rate of the company is 0.34%.

b) If the company decides to only borrow $350 million for 5 years, calculate the present value of the tax shield for the company. What is the value of the company now? (2 marks)

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