Question: please answer each part and show steps QUESTION 2: AllEquity Limited an all equity firm, pays no corporate taxes. It has 1,000,000 shares outstanding which

please answer each part and show steps please answer each part and show steps QUESTION 2: AllEquity Limited an

QUESTION 2: AllEquity Limited an all equity firm, pays no corporate taxes. It has 1,000,000 shares outstanding which are trading at $100 each. Mr. NoMoney and Ms. MoneyTree are shareholders of AllEquityLimited. AllEquity, NoMoney and MoneyTree can borrow and lend money at 6%. NoMoney has a personal tax rate of 30% and MoneyTree of 25% on both equity income and debt income. The value of their holdings and their overall borrowing and lending positions are given below: AllEquity desires a debt/equity ratio of 3/5. To meet this desire the firm issued debt and used the proceeds to repurchase the shares. Show the value of each shareholder's holding, borrowing and lending positions, and the \$return before and after the change in capital structure. Show how each one of them can obtain the same $ return after the change in capital structure as obtained before the change. You can use E to indicate AllEquity's earnings before interest and taxes

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