150 (10 points) The following are book and market balance sheets for the Hoowhee company: BOOK (Millions of Dollars) Net Working Capital 35 Debt 55 Long-Term Assets 115 Equity 95 150 MARKET (Millions of Dollars) Net Working Capital 35 Debt 55 Long-Term Assets 145 Equity 125 180 180 Assume perfect capital markets with both corporate and personal taxes. The firm is not expected to grow and the $55 mil of debt is expected to be permanent. The corporate tax rate is 36%, the bondholder tax rate is 30%, and the equity holder tax rate is 15%. Answer the following questions. (a) How much of the levered firm's value is attributable to the tax shield on debt? (b) Suppose the firm borrows an additional $29 million of debt and plans to use the borrowed money to repurchase stock? What will be the market value of equity after the additional borrowing, but before the repurchase is executed? (c) Suppose that before the transaction described in part (b) the firm had 11,500,000 shares -- outstanding. If the firm uses the $29 million debt issue proceeds to repurchase shares at a price of $12 per share, what is the price per share after the transaction? 150 (10 points) The following are book and market balance sheets for the Hoowhee company: BOOK (Millions of Dollars) Net Working Capital 35 Debt 55 Long-Term Assets 115 Equity 95 150 MARKET (Millions of Dollars) Net Working Capital 35 Debt 55 Long-Term Assets 145 Equity 125 180 180 Assume perfect capital markets with both corporate and personal taxes. The firm is not expected to grow and the $55 mil of debt is expected to be permanent. The corporate tax rate is 36%, the bondholder tax rate is 30%, and the equity holder tax rate is 15%. Answer the following questions. (a) How much of the levered firm's value is attributable to the tax shield on debt? (b) Suppose the firm borrows an additional $29 million of debt and plans to use the borrowed money to repurchase stock? What will be the market value of equity after the additional borrowing, but before the repurchase is executed? (c) Suppose that before the transaction described in part (b) the firm had 11,500,000 shares -- outstanding. If the firm uses the $29 million debt issue proceeds to repurchase shares at a price of $12 per share, what is the price per share after the transaction