Calculate dollar increase in the combined after-tax income

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Reference no: EM131797284

Question: River Cruises is all-equity-financed with 56,000 shares. It now proposes to issue $310,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 31,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar increase in the combined after-tax income of its debtholders and equityholders if profits before interest are:

		Increase in cash flow
a.	$81,000	$
b.	$106,000	$
c.	$181,000	$

Reference no: EM131797284

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