$29.$ Gribble Bug Exterminators are financed by pure equity and expect EBIT to be

$$22,000$ perpetually, and have a cost of equity of $13\%,$ with a tax rate of $35\%.$

Assume that M&M Proposition $1$ & $2$ hold and there are no bankruptcy costs. What is

the value of the firm under the optimal capital structure? $($Answer: E$)$

a$.$ $$120,500$

b$.$$$129,250$

c$.$ $$132,750$

d$.$ $$139,750$

e$.$ $$148,500$

$30.$ Burns Nuclear Plant is facing bankruptcy and can be liquidated for $$40$ million. If

Burns can restructure and sell off any unprofitable divisions they can manage to

reduce the riskiness of future cash flows and bring their WACC to $11\mathrm{.}5\%.$ Burns has

a tax rate of $33\%.$ What would the minimum perpetual pre$-$tax operating cash flows

have to be for restructuring to be viable? $($Answer: C$)$

a$.$ $$4,600,000\mathrm{.}00$

b$.$ $$5,665,384\mathrm{.}22$

c$.$ $$6,865,671\mathrm{.}64$

d$.$ $$7,332,107\mathrm{.}54$

e$.$$$7,869,475\mathrm{.}31$