a.The market value of a firm's assets is $4.1 billion. If the market value of the firm's liabilities is $2.2 billion, what is the market value of the stockholders' investment?

Market value of the stockholders' investment $_________billion

b.Crane Comics, Inc., has borrowed $125 million and is required to pay its lenders $15 million in interest this year. If Crane is in the 30 percent marginal tax bracket, then what is the after-tax cost of debt (in dollars as well as in annual interest percentage) to Crane?(Round answers to 2 decimal places, e.g. 15.25 or 15.25%.)

In PercentageIn Percentage

After-tax cost of debt $_____________milliion______________%

c.Crane's T-Shirts, Inc., has debt claims of $430 (market value) and equity claims of $570 (market value). If the after-tax cost of debt financing is 12 percent and the cost of equity is 18 percent, what is Crane's weighted average cost of capital?(Round answer to 2 decimal places, e.g. 15.25%.)

Weighted average cost of capital _________________%

d. You are analyzing a firm that is financed with 80 percent debt and 20 percent equity. The current cost of debt financing is 9 percent, but due to a recent downgrade by the rating agencies, the firm's cost of debt is expected to increase to 11 percent immediately.

How will this increase change the firm's weighted average cost of capital if you ignore taxes?(Round answer to 2 decimal places, e.g. 15.25%.)

Ignoring taxes firm's weighted average cost of capital will decrease by ______________%

If you consider taxes and the firm is subject to a 35 percent marginal tax rate?(Round answer to 3 decimal places, e.g. 15.250%.)

Considering taxes firm's weighted average cost of capital will increase by _____________%