Aceline Corp is currently all equity financed. Cost of capital is 15% and firm value is 10 million. The company is considering a 4 million debt issue and 8% interest rate. Money is to repurchase shares. Marginal tax rate is 35%. According to m and m proposition what is Acelines return on equity

Aceline Corp is currently all equity financed. Cost of capital is 15% and firm value is 10 million. The company is considering a 4 million debt issue and 8% interest rate. Money is to repurchase shares. Marginal tax rate is 35%. According to m and m proposition what is Acelines return on equity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question in photo- A.13.09% B. 17.46% C. 14.10% D.15% E. 16.70%

l Bell
4:53 PM
Aceline Corp is currently
all equity financed. Cost of
capital is 15% and firm
value is 10 million. The
company is considering a 4
million debt issue and 8%
interest rate. Money is to
repurchase shares.
Marginal tax rate is 35%.
According to m and m
proposition what is
Acelines return on equity
after the debt issue?
VX

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