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what is the new beta of the equity, assuming the beta of debt is 0? You work for a firm that is 100% financed with
what is the new beta of the equity, assuming the beta of debt is 0?
You work for a firm that is 100% financed with equity. The market value of the firm is $20 million. The company decides to change its capital structure by replacing $10 million of equity with $10 million of perpetual debt (with a 5% annual interest rate). The tax rate is 35%. This capital structure change will cost the firm $1 million. What would be the new value of the firm after this change? And what would be the value of the debt and the equity Step by Step Solution
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