Farmington Company can borrow at 6.9 percent. The company currently has no debt and the cost o equity is 11.3 percent. The current value of the firm is $645,000. The corporate tax rate is 25 percent. What will the value be if the company borrows $ 360,000 and uses the proceeds to repurchase shares? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

Farmington Company can borrow at 6.9 percent. The company currently has no debt and the cost o equity is 11.3 percent. The current value of the firm is $645,000. The corporate tax rate is 25 percent. What will the value be if the company borrows $ 360,000 and uses the proceeds to repurchase shares? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 8P

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