What is the value of the firm after adding debt, Finance Basics

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What is the value of the firm after adding debt

Problem

Consider the Modigliani and Miller world of corporate taxes. An unleveraged (all-equity) firm value is $80 million. By adding debt, the annual interest expense is $18 million, the corporate tax rate is 20%, and the discount rate on the tax shield is 8.0%. What is the value of the firm after adding debt?

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Finance Basics: What is the value of the firm after adding debt

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