Bombay Company's book and market value balance sheets are:
(NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value):
According to MM's Proposition I corrected for taxes,what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 35% marginal corporate tax rate.

Question

Bombay Company's book and market value balance sheets are:
(NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value): 
According to MM's Proposition I corrected for taxes,what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 35% marginal corporate tax rate.

Quizplus · Accepted Answer

The Answer of Bombay Company's book and market value balance sheets are:
(NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value): 
According to MM's Proposition I corrected for taxes,what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 35% marginal corporate tax rate.

Bombay Company's Book and Market Value Balance Sheets Are