Question 1 5 pts Assume that the only market imperfection comes from corporate taxes. The corporate...
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Question 1 5 pts Assume that the only market imperfection comes from corporate taxes. The corporate taxrate is 40%. Skcolraw Inc., an all-equity firm, is currently worth $80 million. The company decides to issue $20 million worth of debt and to use the proceeds to buy back $20 million worth of equity. After the fact (i.e., after the debt is issued and the equity is repurchased), what is the value of equity? Edit View Insert Format Tools Table 12pt Paragraph B I T after issuing debt, firm value is 80+20*0.4+20=$108 million Question 1 5 pts Assume that the only market imperfection comes from corporate taxes. The corporate taxrate is 40%. Skcolraw Inc., an all-equity firm, is currently worth $80 million. The company decides to issue $20 million worth of debt and to use the proceeds to buy back $20 million worth of equity. After the fact (i.e., after the debt is issued and the equity is repurchased), what is the value of equity? Edit View Insert Format Tools Table 12pt Paragraph B I T after issuing debt, firm value is 80+20*0.4+20=$108 million
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