Question: Cede & Co. can borrow at 9 percent. Cede currently has no debt, and the cost of equity is 16 percent. The current value of

Cede & Co. can borrow at 9 percent. Cede currently has no debt, and the cost of equity is 16 percent. The current value of the firm is $540,000. What will the value be if Cede borrows $110,000 and uses the proceeds to repurchase shares? The corporate tax rate is 35 percent.

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