The Piano Movers can borrow at 7.5 percent.The firm currently has no debt,and the cost of equity is 16 percent.The current value of the firm is $540,000.What will the value be if the firm borrows $160,000 and uses the proceeds to repurchase shares? The corporate tax rate is 40 percent.
A) $528,000
B) $540,000
C) $552,000
D) $571,000
E) $604,000
Correct Answer:
Verified
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