the value of the business under various financing alternatives, including long-term loan/debt. You have considered a...

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the value of the business under various financing alternatives, including long-term loan/debt. You have considered a loan of $25 million in perpetuity at an interest rate of 4%. Realizing that the chances of bankruptcy are negligible with this amount of ongoing debt on your balance sheet, and the riskiness of the tax shield of debt is the same as the riskiness of debt, you decide to take on $25 million of debt in perpetuity. The growth rate in the cash flows to equity holders between time t = 1 and time t = 2 will be (Enter the number in percentage terms with up to two decimals but no % sign.): the value of the business under various financing alternatives, including long-term loan/debt. You have considered a loan of $25 million in perpetuity at an interest rate of 4%. Realizing that the chances of bankruptcy are negligible with this amount of ongoing debt on your balance sheet, and the riskiness of the tax shield of debt is the same as the riskiness of debt, you decide to take on $25 million of debt in perpetuity. The growth rate in the cash flows to equity holders between time t = 1 and time t = 2 will be (Enter the number in percentage terms with up to two decimals but no % sign.):

Answer rating: 100% (QA)

The information provided allows us to calculate the impact of the debt on the value of the business but its not sufficient to determine the exact grow... View the full answer