Suppose a levered firm ha

Suppose a levered firm ha

Suppose a levered firm has a current value (VL)of $650,000,000. Suppose that the firmcurrently has $242,000,000 in debt. Suppose the firm would have a value (VU) of $565,300,000without debt. Ignore the cost of financial distress.(a) If the firm goes to a debt-to-equity ratio of 2/3, what will the firm be worth?(b) If the firm goes to a debt-to-equity ratio of 3, what will the firm be worth?

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