Question: Capital structure Assignment: An m rm is expected to generate perpetual EBIT of $100 million per year forever. The corporate tax rate is 25%. The

Capital structure Assignment: An m rm is expected to generate perpetual EBIT of $100 million per year forever. The corporate tax rate is 25%. The rm has an unlevered (asset or EV) Beta of 0.8. The risk-free rate is 4% and the market risk premium is 5%. The number of outstanding shares is 10 million. (30 PtS-) 1. Calculate the existing WACC of the unlevered rm. Calculate the total value of this MAJ1E rm and the share price. (30 PtS-) 2. The rm decides to replace part of the equity fmancing with perpetual debt. The rm will issue $150 million of permanent debt at the riskless interest rate of M use this $150 million of proceeds to repurchase the same amount of common stock. A. Find the new value of the levered rm following this capital structure change. B. Find the new number of shares outstanding, and the new share price. (40 PtS-) 3. Calculate the new cost of equity, and the new WACC following this capital structure change. Also calculate the new equity Beta (see les \"Old Final Exam problems\

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