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Bombay Company's Balance Sheet Is as Follows

question 51

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Bombay Company's balance sheet is as follows:
(NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value) : Bombay Company's balance sheet is as follows: (NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value) :   According to MM's Proposition I corrected for taxes, what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 35% tax rate. A)  +$140 B)  +$70 C)  $0 D)  -$70
According to MM's Proposition I corrected for taxes, what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 35% tax rate.

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