a) General Corporation has 100 million outstanding shares with a share price of $5, and it has outstanding debt with a market value of $300 million. Investors expect a 6% return on debt and 12% return on stock. With the consideration of Modigliani and Miller (MM) Position II without tax,

(i) if General Corporation issues new shares of $300 million to redeem all outstanding debt, what is the revised expected return of the stock?

(ii) if General Corporation issues $100 million of new debts to repurchase 20 million of the stock, what is the revised expected return of the stock?

b) Katy Corporation wants to have a weighted average cost of capital (WACC) of 10%. The cost of debt is 5%, the cost of equity is 12%, and the tax rate is 20%. There is no other capital except the mentioned debt and equity. With the given information, calculate the debt-equity ratio to achieve the targeted WACC.

c) Jason Limited has 100 units of outstanding bonds with a coupon rate of 10%, in which the market price and the face value of each bond is $2,000. It is expected that the earnings before interest and tax (EBIT) of the firm would remain constant at $400,000 each year, and the unlevered cost of capital is at 20%. Calculate the firm value of Jason Limited with the consideration of Modigliani and Miller (MM) Proposition 1 with tax if the tax rate is 25%.