Assume that personal and corporate taxes are given by: TC = (corporate tax rate) = 30 percent; TPS= personal tax rate on equity income = 25 percent; and TPB = personal tax rate on interest income = 40 percent. By how much will the value of the firm change if it issues $1 million in debt and uses the proceeds to repurchase equity? а. 0.875 b. 0.125 С. 0.30 d. 1.00 е. None of the above
Assume that personal and corporate taxes are given by: TC = (corporate tax rate) = 30 percent; TPS= personal tax rate on equity income = 25 percent; and TPB = personal tax rate on interest income = 40 percent. By how much will the value of the firm change if it issues $1 million in debt and uses the proceeds to repurchase equity? а. 0.875 b. 0.125 С. 0.30 d. 1.00 е. None of the above
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter17: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 7P
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