12-15 Companies U and L are identical in every respect except that U is unlevered while L has Model $10 million of 5% bonds outstanding. Assume that (1) all of the MM assumptions are met, (2) both firms are subject to a 40% corporate tax rate, (3) EBIT is $2 million, (4) investors in both firms face a tax rate of T, = 28% on debt income and T. = 20%, on average, on stock income, and (5) the unlevered cost of equity, rsu, is 10%. What is the value of the unlevered firm, Vu? . b. What is the value of V,? c. What is the gain from leverage in this situation? Compare this with the gain from leverage in Problem 12-14. d. Set T = T, = Td = 0. What is the value of the levered firm? The gain from leverage? e. Now suppose T, = T, = 0, T = 40%. What are the value of the levered firm and the gain from leverage? f. Assume that To = 28%, T, = 28%, and T. = 40%. Now what are the value of the levered firm and the gain from leverage? 12-15 Companies U and L are identical in every respect except that U is unlevered while L has Model $10 million of 5% bonds outstanding. Assume that (1) all of the MM assumptions are met, (2) both firms are subject to a 40% corporate tax rate, (3) EBIT is $2 million, (4) investors in both firms face a tax rate of T, = 28% on debt income and T. = 20%, on average, on stock income, and (5) the unlevered cost of equity, rsu, is 10%. What is the value of the unlevered firm, Vu? . b. What is the value of V,? c. What is the gain from leverage in this situation? Compare this with the gain from leverage in Problem 12-14. d. Set T = T, = Td = 0. What is the value of the levered firm? The gain from leverage? e. Now suppose T, = T, = 0, T = 40%. What are the value of the levered firm and the gain from leverage? f. Assume that To = 28%, T, = 28%, and T. = 40%. Now what are the value of the levered firm and the gain from leverage