You Have Collected the Following Information for Your Firm

question 15

Multiple Choice

You have collected the following information for your firm: Your firm is contemplating increasing its debt by $100 million and using the funds to repurchase $100 million in equity. The debt would be perpetual and would have a perpetual
Expected return of 8.5%. The firm's current marginal tax is also expected to be permanent.
What will this change do to the value of the firm?

• A)It will decrease firm value by $20 million.
• B)It will increase firm value by 35 million.
• C)It will increase firm value by $140 million.
• D)It will decrease firm value by about $12 million.

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Definitions:

Teeth

Hard, calcified structures in the mouth used for biting and chewing food, also playing a role in speech.

Water-Soluble

Capable of dissolving in water, often referring to substances that can be easily absorbed or metabolized by the body or the environment.

Vitamin C

An essential nutrient and antioxidant found in certain foods that supports immune function, skin health, and wound healing, among other bodily functions.

Jejunum

The mid-portion and the majority of the small intestine.