Question: Question 2 ( 2 0 marks ) Alpha Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result,

Question 2(20 marks)Alpha Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firms debt-equity ratio is expected to rise from 35 percent to 50 percent. The firm currently has $2.7 million worth of debt outstanding. The cost of this debt is 6.4 percent per year. The firm expects to have an EBIT of $940,000 per year in perpetuity and pays no taxes. (Assume no effect of taxes)

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