An all-equity firm is subject to a 30% corporate tax rate, Its total market value is initially $3,500,000. There are 175,000 shares outstanding. It announces that it will issue $1 million of bonds at 10% interest and uses the proceeds to buy back common stock (Assume no change in costs of financial distress). Part A: What will happen to the market value of equity at the announcement of the share repurchase? Increases to $3,800,000 Stays the same Decreases to $2,500,000 Increase to $4,500,000 Part B: How many shares can the firm buy back with the $1 million bond issue? 46,052.63 50,000.00 43,040.40 34,632.35 Question 13 ( 8 points) Part C: The cost of unlevered equity (r0) is 20%. Use MM's II proposition to calculate the rate of return demanded by shareholders after the share repurchase? 22.50% 21.84% 22.63% 23.57%