Problem

M&M. Guerin Enterprises has no debt. Its current total value is $70 million.Ignoring t...

M&M. Guerin Enterprises has no debt. Its current total value is $70 million.Ignoring taxes, what will the company’s value be if it sells $32 million in debt? Suppose now that the company’s tax rate is 40 percent. What will its overall value be if it sells $32 million in debt? Assume debt proceeds are used to repurchase equity.

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Solutions For Problems in Chapter 13