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Brenton point health plan

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Reference no: EM132390796

Health Plan currently zero-debt financing. Its operating profit is $1.5 million, and it pays taxes at a 25% rate. It has $6 million in assets and, because it is all-equity financed, $6 million in equity. Suppose the firm is considering replacing 40% of its equity financing with debt financing that carries a 5% interest rate.

What impact would the new capital structure have on Brenton Point Health Plan's

a. Profit?

b. Total dollar return to investors?

c. Return on Equity?

Reference no: EM132390796

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