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Question
Compuvac Company has just completed its first pass forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
a. $240,000
b. $0
c. $480,000
d. $160,000
e. $640,000
Answer
This answer is hidden. It contains 359 characters.
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