Neal Enterprises has no debt. Its current total value is $76.8 million. Assume debt proceeds are used to repurchase equity.
Requirement 1: Ignoring taxes, what will the company’s value be if it sells $35.4 million in debt?
Requirement 2: Suppose now that the company’s tax rate is 35 percent. What will its overall value be if it sells $35.4 million in debt?