On-the-Fence Co.(OTF) is considering issuing an additional $5,000,000 perpetual debt.It is subject to a 35% marginal corporate tax rate but is being told that the costs of financial distress on that additional debt is $1,000,000.What should OTF do?
A) Do not issue the debt
B) Issue the debt
C) It doesn't matter what it does as M&M with perfect markets holds
D) none of the above
Correct Answer:
Verified
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