A.

Cruz Corporation has $150 billion of debt outstanding. An otherwise identical firm has no debt and has a market value of $600 billion. Under the Miller model, what is Cruz's value if the federal-plus-state corporate tax rate is 28%, the effective personal tax rate on stock is 17%, and the personal tax rate on debt is 29%? Enter your answer in billions. For example, an answer of $1.23 billion should be entered as 1.23, not 1,230,000,000. Do not round intermediate calculations. Round your answer to two decimal places.

$ billion

B.

Lee Manufacturing's value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, w_d = 1/3. The firm had 28 million shares before the recap. What is P (the stock price after the recap)? Do not round intermediate calculations. Round your answer to the nearest cent.

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