Use the Information for the Question(s)below

question 80

Essay

Use the information for the question(s)below.
You own your own firm and you need to raise $50 million to fund an expansion.Following the expansion,your firm will be worth $75 million in its unlevered form.You want to go ahead with the expansion,but you are concerned that you may not be able to maintain ownership of over 50% of your firm's equity.In other words,you are concerned that if you use equity to finance the expansion,you may lose control of your firm.
-Assume that capital markets are perfect except for the existence of corporate taxes and that your firm pays 35% of earnings in taxes.If you want to maintain ownership of at least 50%,then calculate the minimum amount of debt that you must issue to fund the expansion.

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Definitions:

Hematocrit determination

A laboratory test that measures the proportion of red blood cells in blood volume to assess an individual's blood composition.

Red blood cells

Specialized cells in the body responsible for carrying oxygen from the lungs to the rest of the body and returning carbon dioxide to be exhaled.

Centrifuge

A device used to spin a specimen at high speed until it separates into its component parts.

Hemoglobin determination

A laboratory test used to measure the amount of hemoglobin in the blood, which is crucial for diagnosing and managing various medical conditions.