Fidget Inc.is currently worth $10,000,000.It is told that if it issues $1,000,000 of perpetual debt (and uses the proceeds to repurchase equity) the value of the firm will increase by $290,000.If the total bankruptcy costs and agency costs combine to be a cost of $20,000,what is Fidget's marginal corporate tax rate? Ignore personal taxes.
A) 29%
B) 30%
C) 31%
D) none of the above
Correct Answer:
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