Business, 30.10.2020 17:00 musoke25p8zrsw

Judge Corp. is unlevered and is valued at $100,000,000. Judge is currently deciding whether including permanent debt in its capital structure would increase firm value. The current cost of capital (unlevered cost of equity) is 12%. Under consideration is issuing $40,000,000 in new debt at a 6% interest rate, and the proceeds of the debt issuance would be used to immediately repurchase $40,000,000 of stock. The effective marginal tax bracket is 30%. Ignore any financial distress costs for purposes of answering this question and assume that the firm has enough taxable income that the firm will always be able to use the interest tax shield – in other words, the debt will be outstanding FOREVER. Use Modigliani and Miller (MM) propositions I and II with corporate taxes and the related formulas to answer the questions below. a. What is the value of the levered firm after after the recap? (2 points)

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 04:10

You are head of the schwartz family endowment for the arts. you have decided to fund an arts school in the san francisco bay area in perpetuity. every 5 years, you will give the school $ 1 comma 000 comma 000. the first payment will occur 5 years from today. if the interest rate is 5.9 % per year, what is the present value of your gift?

Answers: 1

Answer

Business, 22.06.2019 10:30

Marketing1. suppose the average price for a new disposable cell phone is $20, and the total market potential for that product is $4 million. topco, inc. has a planned market share of 10 percent. how many phones does topco have the potential to sell in this market? 20,0002. use the data from question 3 to calculate topco, inc.'s planned market share in dollars. $400,0003. atlantic car rental charges $29.95 per day to rent a mid-size automobile. pacific car rental, atlantic's main competitor, just reduced prices on all its car rentals. in response, atlantic reduced its prices by 5 percent. now how much does it cost to rent a mid-size automobile from atlantic? $28.45

Answers: 1

Answer

Business, 22.06.2019 11:30

Which of the following is not an example of one of the four mail advantages of prices on a free market economy

Answers: 1

Answer

Business, 22.06.2019 21:50

scenario: hawaii and south carolina are trading partners. hawaii has an absolute advantage in the production of both coffee and tea. the opportunity cost of producing 1 pound of tea in hawaii is 2 pounds of coffee, and the opportunity cost of producing 1 pound of tea in south carolina is 1/3 pound of coffee. which of the following statements is true? a. south carolina should specialize in the production of both tea and coffee. b. hawaii should specialize in the production of tea, whereas south carolina should specialize in the production of coffee. c. hawaii should specialize in the production of coffee, whereas south carolina should specialize in the production of tea. d. hawaii should specialize in the production of both tea and coffee.

Answers: 1

Answer

You know the right answer?

Judge Corp. is unlevered and is valued at $100,000,000. Judge is currently deciding whether includin...

Questions