Bird Enterprises has no debt. Its current total value is $49.2 million. Assume debt proceeds are used to repurchase equity. |
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a. | Ignoring taxes, what will the company’s value be if it sells $19.5 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, round your answer to the nearest whole number, e.g., 1,234,567.) |
b. | Suppose now that the company’s tax rate is 21 percent. What will its overall value be if it sells $19.5 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) |
a. Value of the firm if no tax.
Value of the firm = $49,200,000
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b.Value of firm with taxes.
Value of the firm = $49,200,000 + ($19,500,000*21%)
Value of the firm = $49,200,000 + $4,095,000
Value of the firm = $53,295,000
Bird Enterprises has no debt. Its current total value is $49.2 million. Assume debt proceeds are...
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