Question 7

the menu; men ! Dab: ! so too ' .. 8 too \"a\" \" the mainooapteat $ in Debt s_ so no n: eyf ' ' no ' S 320 $ 220 W 3' Assume that \"M's theory holds except for taxes. There Is no growth. and the $60 of debt is expected to be permanent. Assume a 21% corporate tax rate. o. How much of the rrn's market value ls accounted for by the debt-generated tax shield? (Enter your answer In million rounded to 2 decimal pious.) b. What is Linked Ftypen's after-tax WACC If {Debt = 7.6% and Equity = 15.4%? (Do not round intermediate ukuletions. Enter your em as e pereem muted no 2 decimal places.) C. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the newvolue of the rm, other things equal? Assume a bon'owlng rate of 7.6% (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.)