RWJ 7th Edition Solutions - Colby College

We can use the face value of the debt and the current market value of the debt to find the interest rate, so: Interest rate = [$1,000/$952.38] – 1 . Interest rate = .05 or 5%. c. The value of the equity will increase. The debt then requires a higher return; therefore the present value of the debt is less while the value of the firm does not ... ................
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