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Increase in the value of the company after the loan

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The Bellwood Company is financed entirely with equity. The company is considering a loan of $4.5 million. The loan will be repaid in equal principal installments over the next two years and has an interest rate of 7 percent. The company's tax rate is 24 percent.

According to MM Proposition I with taxes, what would be the increase in the value of the company after the loan?

Reference no: EM132407022

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