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1. What is the value of equity for a firm with $50 million EBIT, 21% tax rate, $100 million debt, 5% cost of debt and

1. What is the value of equity for a firm with $50 million EBIT, 21% tax rate, $100 million debt, 5% cost of debt and 15% unlevered cost of capital? What are the cost of equity and WACC?

2. Crosby Industries has a debt-equity ratio of 1.5. Its WACC is 9%, and its cost of debt is 6%. There is no corporate tax.

a) What is Crosbys cost of equity capital?

b) What would the cost of equity be if the debt-equity ratio equals 2

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