Question: Your firm will increase its leverage from $ 5 0 million to $ 2 5 0 million. It will maintain leverage at this rate for
Your firm will increase its leverage from $ million to $ million. It will
maintain leverage at this rate for years, at which point it will decrease back to
$ million. Your firm currently has a marginal tax rate of is expected to
remain constant over the foreseeable future. Your firm's interest payments on the
marginal debt are the risk associated with these payments is the riskfree
rate is and your unlevered cost of capital is What is the present value
of the incremental tax shield provided by this temporary leverage increase
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