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Your firm has a before-tax return of $2600 on an investment of $1980 and a marginal tax rate of 35%. The overall cost of capital
Your firm has a before-tax return of $2600 on an investment of $1980 and a marginal tax rate of 35%. The overall cost of capital is 9%. The firm currently uses 40% debt financing with an expected return of 6%. If it increases its use of debt to 50%, the expected return on the debt will be 6.5%. By what percent will the value of the firm increase (decrease) if the firm decides to adopt the new capital structure? Round your answer to the nearest tenth of a percent. O 0.28% 0.18% O 0.27% O 0.08%
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