A company is all-equity-financed with 42,000 shares. It now proposes to issue $170,000 of debt at...

A company is all-equity-financed with 42,000 shares. It now proposes to issue $170,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 17,000 shares. Suppose that the corporate tax rate is 35%. Calculate the increase in cash flow in the combined after-tax income of its debtholders and equityholders if EBIT is $92,000?

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jeff jeffy answered 1 year ago

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