Ignoring taxes, what will the company’s value be if it sells $35.8 million in de
ID: 2761720 • Letter: I
Question
Ignoring taxes, what will the company’s value be if it sells $35.8 million in debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
Suppose now that the company’s tax rate is 32 percent. What will its overall value be if it sells $35.8 million in debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
Neal Enterprises has no debt. Its current total value is $77.6 million. Assume debt proceeds are used to repurchase equity.Explanation / Answer
1) Value of firm = 77.6m
2) Value of firm = 77.6+35.8*0.32 = 89.056m
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