Neal enterprises has no debt its current total value is 74, Financial Management

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Neal enterprises has no debt its current total value is 74

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:

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Financial Management: Neal enterprises has no debt its current total value is 74

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Financial Management: Neal enterprises has no debt its current total value is 74

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