The personal tax rate on debt is 21 and the personal tax on, Financial Management

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The personal tax rate on debt is 21 and the personal tax on

The personal tax rate on debt is 21% and the personal tax on equity is 10%. The corporate tax rate is 15%. There is a firm, initially with no debt and market value $3 billion. This firm decides to issue $200 million of perpetual risk-free debt paying the risk free interest rate of 3%. The proceeds from the sale of debt are used to buy back shares. What is the gain from such leverage, GL?

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Financial Management: The personal tax rate on debt is 21 and the personal tax on

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