17-6: Capital Structure Theory: Arbitrage Proofs of the Modigliani-Miller Theorems Problem 17-6 MM without The Companies U and L are identical in every respect except that is unlevered while L has $11 million of % bonds outstanding. Assume that (1) there are no corporate or personal taxes (2) all of the other MM assumptions are met, (3) EBIT is $2 million, and (4) the cost of equity to Company U is 10% a. What value would MM estimate for each firm? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places Company U Company milion b. What is rs for Firm U7 Round your answer to two decimal places. What is r for Firm L? Do not round intermediate calculations. Round your answer to two decimal places c. Find S. Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000 $ million d. What is the WACC for Firm U? Round your answer to one decimal place. What the WACC for Firm L? Round your answer to one decimal place. e. Suppose V - $20 million and - $22 million. According to MM, are these values consistent with equilibrium? 17-6: Capital Structure Theory: Arbitrage Proofs of the Modigliani-Miller Theorems Problem 17-6 MM without The Companies U and L are identical in every respect except that is unlevered while L has $11 million of % bonds outstanding. Assume that (1) there are no corporate or personal taxes (2) all of the other MM assumptions are met, (3) EBIT is $2 million, and (4) the cost of equity to Company U is 10% a. What value would MM estimate for each firm? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places Company U Company milion b. What is rs for Firm U7 Round your answer to two decimal places. What is r for Firm L? Do not round intermediate calculations. Round your answer to two decimal places c. Find S. Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000 $ million d. What is the WACC for Firm U? Round your answer to one decimal place. What the WACC for Firm L? Round your answer to one decimal place. e. Suppose V - $20 million and - $22 million. According to MM, are these values consistent with equilibrium