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What is PV of financial distress costs the firm will incur

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Question - The firm's current share price is $58 with 100 million shares outstanding. Suppose the firm announces plans to increase its leverage by borrowing $1050 million and repurchasing shares. Suppose the only market imperfections are corporate taxes with 21% tax rate and financial distress costs. If the share price rises to $60 after this announcement, what is the PV of financial distress costs the firm will incur as the result of this new debt?

Reference no: EM132945991

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