a) Sardines Processed Foods is currently valued at 500 million. Sardines will be repurchasing 100 million of its equity by issuing a perpetual debt issue at a 10 per cent annual interest rate. Sardines is subject to a 30 per cent marginal tax rate. Given all of the Modigliani and Miller assumptions, except the assumption that there are no taxes, what value will Sardines have after the recapitalisation?

b) Iron Mountain currently has 30 000 shares outstanding. Each share has a market value of 20. If the firm pays 5 per share in dividends, what will the value of each share be worth after the dividend payment? Ignore taxes.

c) Tiffany Inc. is currently valued at 900 million but management wants to completely pay off its perpetual debt of 300 million. Tiffany Inc. is subject to a 30 per cent marginal tax rate. If Tiffany Inc. pays off its debt, what will be the total value of its equity?