8. Ivan Industries (II) has a debt-to-equity ratio of 1.4, a corporate tax rate of 30%, pays 4% interest on its debt and has a required rate of return on equity of 12%. What is It's WACC? How much does the debt tax shield reduce II's WACC? What is the required rate of return on firm assets? 9. One-year estimates suggest that Mulligan Manufacturing (MM) has a 20% probability of being worth $100 million, a 50% probability of being worth $200 million, a 10% probability of being worth $330 million and a 20% probability of being worth $400 million. The firm has two discount bonds outstanding: a senior bond outstanding with a face value of $100 million and a promised rate of return of 5% and a junior bond outstanding with a face value of $40 million and a promised return of 20%. If the fims required rate of return its assets is 12%, then what is the firm's levered cost of equity? 10. Tundra Textiles (TT) has assets of $100 million (including $10 million in cash) and debt of $20 million. If TT borrows an additional $10 million to repurchases $20 million of stock, what is TT's new debt-to-equity ratio? 11. Tundra Textiles, Inc. (TTI) currently has a debt-to-equity ratio of 0.35 and a total market value of $200 million. TTI believes that increasing leverage (by taking on debt and repurchasing an equal dollar amount of shares) will increase firm value; consequently, TTI has set a target debt-to-equity ratio of 0.6, which they plan to maintain permanently. If TTi's marginal tax rate is 30%, then present value of the tax shield it will create? 12. Cliff Corp (CC) will be worth either $60 million, $80 million or $100 million in one year with equal probabilities. The firm has bonds outstanding with a promised payment of $75 million in one year at an expected rate of 6% and the required rate of return on the CC's assets is 12%. What is CC's equity cost of capital? What is the expected payoff of the debt? What is the debt's promised rate of return