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Edsel Research Labs Has $27 Million In Assets Currently Half Of These Assets Are Financed With Longterm Debt At

Question

Edsel Research Labs has $27 million in assets. Currently half of these assets are financed with long-term debt at

5 percent and half with common stock having a par value of $10. Ms. Edsel, the Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 5 percent. The tax rate is 30 percent.

Financial Accounting