Neal Enterprises has no debt. Its current total value is $74 million. Assume debt proceeds are used to repurchase equity.
A) Ignoring taxes, what will the company’s value be if it sells $34 million in debt?
Value of the Firm:
B) Suppose now that the company’s tax rate is 35 percent. What will its overall value be if it sells $34 million in debt?
Value of the Firm: