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    Market Value Leverage Ratio; Value of the Tax Shield

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    1. A firm has the following book-value balance sheet; Debt =$13,000, Common Stock ($1 par)= 697 and Retained Earnings = $15,000. The book value of assets is the total of Debt, Common Stock and Retained Earnings. The firm's bonds are currently selling for $996 and the firm's stock is currently selling for $9. What is the firm's market value leverage ratio?

    2. A firm has the following book-value balance sheet; Debt =$9,000, Common Stock ($1 par)= 11 and Retained Earnings = $38,000. The book value of assets is the total of Debt, Common Stock and Retained Earnings. The firm's bonds are currently selling at par and the firm's stock is currently selling for $12. The firm's tax rate is 33%. What is the value of the firm's tax shield

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    https://brainmass.com/business/financial-ratios/market-value-leverage-ratio-value-tax-shield-441977

    Solution Preview

    1. Market value of leverage ratio = market value of debt / (market value of ...

    Solution Summary

    The solution determines the market value leverage ratio and the value of the tax shield.

    $2.19

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