Question

Book Value BalanceNet Working Capital $ 30        Debt $80Long

Term Assets      70         Equity 20

                                   100                     100

Market Value Balance

Net Working Capital $ 30       Debt $80

Long Term Assets    170         Equity 120

                                   200                         200 

$80 of debt and 32% corporate tax rate.

A grace period of 5 years. What will be the new value of the firm? Borrowing rate of 6.5%

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