An all-equity business has 120 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization (a recap). It will raise $1 billion in debt and repurchase 50 million shares.

a. What is the market value of the firm prior to the recap? What is the market value of equity?

Note: Enter your answers in billions rounded to 2 decimal places.

b. Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity?

Note: Enter your answers in billions rounded to 2 decimal places.