1F.5
5.Your company is thinking of raising $10 million dollars by issuing debt with a 10% coupon. Your tax rate is 40% and the debt will be considered to be permanent. What is the total increase in the value of the firm? (5 pts)
(5 cont.) If your company had $100 million in equity and $50 million in debt before issuing the new debt, what is the new value of equity and debt? (4 pts)