Company JJJ is currently 100% equity financed, with 15 million shares outstanding at a current market price of 8$ per share. Investors have always expected that JJJ would remain 100% equity financed. However, the Board of Directors and CEO have decided to issue $40 million in debt, and use the proceeds to repurchase existing shares. The debt has an interest rate of 5% and under the new plan JJJ would always roll over existing debt, to keep total debt at $40 million forever. The corporate tax rate is 35%.

a. What is the market value of JJJs assets prior to the announcement of the capital restructuring?

b. What is the market value of JJJs assets (including the value of the tax shield) after the announcement of the capital restructuring? What is the price of each share now?

c. Write down JJJs market value balance sheet after the restructuring