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Assuming perpetual cash flows in Case II - Proposition I, what is the value of the equity for a firm with following values?: EBIT =

Assuming perpetual cash flows in Case II - Proposition I, what is the value of the equity for a firm with following values?:
EBIT = $50 million
Tax rate =30%
Debt = $100 million
Cost of debt =9%
Unlevered cost of capital =12%
2. Find the cost of equity and the return on assets (WACC).
3. Suppose that the firm changes its capital structure so that the debt-to-equity ratio becomes 1.
a. What will happen to the cost of equity under the new capital structure?
b. What will happen to the return on assets (WACC) under the new capital structure?
4. What happens to the the returb an assets (WACC) as D/E increases? Why?

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