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Unformatted text preview: taxes, where the value of the firm remains constant at all levels of debt, what must be the firm’s cost of debt? A. 4.6% B. 4.4% C. 4.2% D. 4.0% E. 3.8% 22. You are given the information indicated below. Using the same procedure demonstrated in class (price changes in anticipation of the new level of debt), calculate by how much the price of this firm's stock will increase if it moves to $20,000 of debt and uses the proceeds to repurchase its equity. Assets Starting Values Current Assets $20,000 Net Fixed Assets $20,000 Total $40,000 Liabilities & Net Worth Starting Values Debt $0 Equity (4,000 Shares) $40,000 Total $40,000...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08