Business, 25.12.2019 20:31 princessbreanna0

Assume that mm's theory holds with taxes. there is no growth, and the $40 of debt is expected to be permanent. assume a 40% corporate tax rate.
a. how much of the firm's value is accounted for by the debt-generated tax shield?
b. how much better off will uf's a shareholder be if the firm borrows $20 more and uses it to repurchase stock? "

step 1:
tax rate - tc =
a. permanent debt - d =
b. additional debt - d =

step 2:

a. tax shield formula =
b. tax shield formula =

benefit to shareholders =

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Assume that mm's theory holds with taxes. there is no growth, and the $40 of debt is expected to be...

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