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What will the value of the firm capital be

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Question - Yesterday Moreland Inc. had zero debt and $500m worth of equity. Investors required an expected return of 9% per year. Today they decided to financial recapitalization and purchase $250m of debt at a rate of 6% and use the proceeds to buyback stock. If Moreland Inc. pays no taxes and there are no other special advantages of debt financing, what will the value of the firm's capital be after it issues the debt?

Reference no: EM132978057

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