Crown inc is a pure equity firm firm decides to, Financial Management

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Crown inc is a pure equity firm firm decides to

Crown Inc. is a pure equity firm. Firm decides to recapitalize to take advantage of tax shield. Firm’s marginal tax rate is 40%. After a substantial borrowing, firm’s cost of equity goes up to 10%. Assuming that firm’s asset beta is 0.9, risk free rate is 2%, and EMRP is 5%, firm’s post recapitalization debt ratio is closest to None of the above 72% 56% 42% 129%.

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