Question: Capital structure Assignment: An m rm is expected to generate perpetual EBIT of $45 million per year forever. The corporate tax rate is 0% in

Capital structure Assignment: An m rm is expected to generate perpetual EBIT of $45 million per year forever. The corporate tax rate is 0% in a fantasy no tax world. The rm has an unlevered (asset or EV) Beta of 1.0. The risk-free rate is 4% and the market risk premium is 5%. The number of outstanding shares is 10 million. EEO-points 1. Calculate the existing WACC of this all equity or unlevered rm. Calculate the total value of this aLeog; rm and the existing share price. 30-points 2. The rm decides to replace part of the equity nancing with perpetual debt. The rm issues $100 million of permanent debt at the risldess interest rate of 4341% repurchases $100 million of equity. A. Find the new value of the levered rm. B. Find the new number of shares outstanding, and the new share price. 40-points 3. Calculate the new equity Beta, new cost of equity, and new WACC following this capital structure change. Assume a debt beta of zero

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