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What is the value of the firm

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Question - You own 5 % or 40,000 shares of Selma, Inc. Your shares have a total market value of $700,000. By what percentage will the total value of your investment in Selma change if the company sells an additional 200,000 shares of stock at $16 a share and you do not buy any?

Lazare Corporation expects an EBIT of $25,300 every year forever. Lazare currently has no debt, and its cost of equity is 11%. The firm can borrow at 8%.

a. If the corporate tax rate is 35%, what is the value of the firm?

b. What will the value be if the company converts to 60% debt?

c. What will the value be if the company converts to 100% debt?

Reference no: EM132831713

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