1)

B.I. NGO is a non-government organization that is exempt from corporate taxes; in other words, B.I. does not pay corporate taxes. However, to finance its charitable activities it has issued both debt and equity. The NGOs debtholders pay a 34% tax rate on the interest they receive, and the NGOs equity holders pay a 27% tax rate on the dividends they receive. Assuming that the MM 1963 model with personal taxes holds, by how much will the market value of the assets of this NGO change if its debt increases by $28,000? Give the answer as an amount rounded to the nearest dollar. Thus, if you believe the answer is -$2,348.55 then write -2349 as your answer. (Acceptable error = $20)

2)

Dooda Mfg. has just changed its capital structure from D = $425,000 to D = $272,000. Before the change, the market value of Dooda's equity was $650,000. Find the market value of Doodas equity now that the company has changed its debt. The corporate tax rate is 26%. Give the answer as a dollar amount with no decimals; e.g., if you believe the answer is $456,789.55 then write your answer as 456790 (Acceptable error = $500).

show work