How much would the value of samsung increase in given issue

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Question: Samsung currently has no debt and a cost of equity of 25%. They are thinking about issuing debt to buy back some of their equity. In particular, they are thinking about issuing $100 in debt with a coupon rate and yield-to-maturity of 5%. Further, their plan is to keep their debt level constant at $100 over time forever, no matter how well the firm does. How much would the value of Samsung increase if they follow through with this plan, and their tax rate is 40%?

Reference no: EM132078472

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