An all-equity firm consists of a single project that will produce a perpetual cash flow of either $100M(800d state) or $30M (bad state) next year. The probability of the good state is 30 percent. The beta of the asset cash flows is 1:25, the risk-free rate is 3 percent, and the market risk premium is B percent There are 6M shares outstanding: Suppose the firm announces it will issue $40M in perpetual debt. The debt has an interest rate of 8 percent. If are 80 percent, we would expect the firm's share price to increase after the announcement holding all else equal. agency costs bankruptcy costs corporate taxes An indluidual ivwevtor is subject to a 30 percent twx en $ vidends ane 20 percerat tas en capial caink, what is the effective tax rate for the imvestor! 12% 13x 148 Quertion 15 (4 pointe) Stomet bankruptcveots and a firm's share brice die to the expetied tar whield. rahe, lawer lawer, lower lowntivise Questien 16 (4 poircu) thent A positive NOW project recuires a 520M imentment. What market triction would lelad a thareholder to prefer that the firm issiat shares instead of debt te fund the proiect? Bankrivicy Const Acency Thet Question 17 (A pointa) eirelarywer and cuitemen. direct indivect tawinetuted Quentien 16(5 peinte) 4 Aner god stale is 30 percent. The heta of the met cash flow is 1.25 , ihe rith-fee rate is a percent, and the maker riak premium is 8 percent. Theie are sM shares outctandine. What is the frice fer tharn of this firm? 65.38 2.42