Question 2 (30 points] The Perpetual Motion Machine (PMM) makes children's toys. The CEO of PMM, Mr. Costa Bundle, has so far maintained a conservative capital structure and a stable dividend payout policy, with dividends paid once a year. He wants to continue with the same policy. A dissident board member, Ms. Constance Bickering, has been arguing however that PMM is under-leveraged. Mr. Bundle wants you to evaluate PMM's current capital structure, as well as Ms. Bickering's proposal. You need to have your estimates ready before Mr. Bundle goes into a board meeting later today. You have the following information. PMM currently has $150 million of (riskless) debt, and it has maintained this debt level for many years. The expected dividend yield on PMM stock is 3% and the expected capital gains yield is 7%. The current stock price of PMM is $108 and it has 10 million shares outstanding. PMM pays an effective tax rate of 20%. The long-term treasury yield is 5% and the expected premium of the S&P500 over long-term U.S. government bonds is 5%. For each of the following questions you should use the information provided in previous parts, including your answers. 2(a) Find the current market value of PMM's equity and its enterprise value. [2 points] Question 2 (30 points] The Perpetual Motion Machine (PMM) makes children's toys. The CEO of PMM, Mr. Costa Bundle, has so far maintained a conservative capital structure and a stable dividend payout policy, with dividends paid once a year. He wants to continue with the same policy. A dissident board member, Ms. Constance Bickering, has been arguing however that PMM is under-leveraged. Mr. Bundle wants you to evaluate PMM's current capital structure, as well as Ms. Bickering's proposal. You need to have your estimates ready before Mr. Bundle goes into a board meeting later today. You have the following information. PMM currently has $150 million of (riskless) debt, and it has maintained this debt level for many years. The expected dividend yield on PMM stock is 3% and the expected capital gains yield is 7%. The current stock price of PMM is $108 and it has 10 million shares outstanding. PMM pays an effective tax rate of 20%. The long-term treasury yield is 5% and the expected premium of the S&P500 over long-term U.S. government bonds is 5%. For each of the following questions you should use the information provided in previous parts, including your answers. 2(a) Find the current market value of PMM's equity and its enterprise value. [2 points]