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1. Below are company values for TOP Corp in millions. Use a 21% tax rate. Book values are NWC of $30, Debt of $50, Equity

1. Below are company values for TOP Corp in millions. Use a 21% tax rate. Book values are NWC of $30, Debt of $50, Equity of $90, and Assets of $110. Market Value values are assets of $160, Debt of $50, NWC of $40, and equity of $150.

a. What is the debt-generated tax shield?

b. Calculate the WACC if the cost of equity is 18% and the cost of debt is 9%

c. Briefly discuss what is going on in this problem concerning debt policy.

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