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What will be the total value of the firm

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Now that your firm has? matured, you are considering adding debt to your capital structure for the first time. Your? all-equity firm has a market value of ?$20 million and you are considering issuing ?$2.0 million in debt with an interest rate of 7?% and using it to repurchase shares. You pay a corporate tax rate of 25?%. Assume taxes are the only imperfection and the debt is expected to be permanent.

a. What will be the total value of the firm after the change in capital? structure?

b. What will be the value of the remaining equity after the change in capital? structure?

a. The total value of the firm after the change in capital structure is ?$enter your response here million.  ?(Round to two decimal? places.)

b. The value of the remaining equity after the change in capital structure is ?$enter your response here million.  ?(Round to two decimal? places.)

Reference no: EM133113873

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