4 Problem 16-21 Taxes and the Cost of Capital (LO2) Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): 25 Book-Value Balance Sheet points Net working capital Long-term assets $ 25 Debt 75 Equity $ 60 40 $ 100 $ 100 eBook Print References Market-Value Balance Sheet Net working capital Long-term assets $ 25 180 $ 205 Debt Equity $ 60 145 $ 205 Assume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if Debt = 6.7% and Equity = 16.3% ? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume an 6.7% borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places. a. PV tax shield b. WACC million % c. New value of the firm million