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Xerxes Manufacturing has 20 million shares outstanding with price 32. It has no debt. After-tax return on equity is 15%. In order to increase return
Xerxes Manufacturing has 20 million shares outstanding with price 32. It has no debt. After-tax return on equity is 15%. In order to increase return on equity, it borrows x and uses it to repurchase shares. It pays 6% interest on the loan. Xerxess corporate tax rate is 25%. Calculate the amount to borrow so that after-tax return on equity is 20%.
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