Epiphany Is an All-Equity Firm with an Estimated Market Value

question 71

Multiple Choice

Epiphany is an all-equity firm with an estimated market value of $300,000.The firm sells $100,000 of debt and uses the proceeds to purchase outstanding equity.Compute the weight in equity and the weight in debt after the proposed financing and repurchase of equity.

• A)0.2,0.8
• B)0.25,0.75
• C)0.67,0.33
• D)0.5,0.5

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