QUESTION $2$

Questions $2-6$ are based on the following description about Bethlehema Steel Company.

Bethlehema Steel is a publicly traded steel company with $$60$ million in outstanding debt and $$40$ million in market value of equity. Assuming the

firm is correctly priced. The firm's cost capital currently is $12\%$ and is expected to generate $$16$ million in EBIT$(1-$T$)$ next year. The firm is expected

to grow in stable growth at $4\%$ a year in perpetuity. To support the growth, the firm needs to invest $50\%$ of its EBIT$(1-$T$)$ in fixed assets and working

capital. You believe if you acquire the control of the firm, you can sell idle assets for $$40$ million and lower the cost of capital to $10\%($Plan A$).$

What would be the new value of the firm if you obtain control and successfully implement your restructuring plan A$?$

a$.100$

b$.133\mathrm{.}33$

C$.160$

d$.320$

QUESTION $3$

Questions $2-6$ are based on the following description about Bethlehema Steel Company.

Bethlehema Steel is a publicly traded steel company with $$60$ million in outstanding debt and $$40$ million in market value of equity. Assuming the

firm is correctly priced. The firm's cost capital currently is $12\%$ and is expected to generate $$16$ million in EBIT$(1-$T$)$ next year. The firm is expected

to grow in stable growth at $4\%$ a year in perpetuity. To support the growth, the firm needs to invest $50\%$ of its EBIT$(1-$T$)$ in fixed assets and working

capital. You believe if you acquire the control of the firm, you can sell idle assets for $$40$ million and lower the cost of capital to $10\%($Plan A$).$

What would be the value of control if following the restructuring plan A$?$

a$.33\mathrm{.}33$

b$.60$

C$.73\mathrm{.}33$

d$.220$