Question: 2. Adding growth to the model Aa Aa E Weghorst Co. has a value of $40 million. Scott is otherwise identical to Weghorst Co., but

 2. Adding growth to the model Aa Aa E Weghorst Co.

2. Adding growth to the model Aa Aa E Weghorst Co. has a value of $40 million. Scott is otherwise identical to Weghorst Co., but has $16 million in debt. Suppose that both firms are growing at a rate of 6%, the corporate tax rate is 37%, the cost of debt is 6%, and Weghorst's cost of equity is 9% (assume rsu is the appropriate discount rate for the tax shield). Use the Modigliani and Miller theory extension for growth to complete the following table: Scott Corp. Value of the firm Value of the stock Cost of equity Weghorst Co. $40 million $40 million 9% $50.00 million $49.52 million $51.84 million $47.20 million

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