DebtCo.has $100,000,000 of perpetual debt outstanding with a cost of 9%.DebtCo.is currently subject to a 30% marginal tax rate.If a new president is elected who surprisingly announces that firms like DebtCo.will now be subject to a 35% marginal tax rate,what should be the effect of the immediate value change on DebtCo.?
A) -$35,000,000
B) -$5,000,000
C) $5,000,000
D) $35,000,000
Correct Answer:
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