company X company y are listed on the johannesburg stock exchange. the two companies are similar in every respect except that company y is geared while company x is not.

	company x	company y
net operating income	12 000 000	12 000 000
debt interest	-	2 000 000
cost of equity of ungeared firm	20%
risk free rate interest rate		15%

4.1 using MMI what is the value of company x?

4.2 calculate the value of company y earnings?

4.3 calculate the value of company y equity ?

4.4 calculate the value of company y debt ?

4.5 calculate the total value of company y?

4.6 suppose you are given the value of an ungeared firm U as R30 000 000.

A similar firm G which is geared has a similar valuation to firm U. the value of G debt is 7 500 000 rands at a cost of 15 % per annum. the cost of equity of the geared firm using MMII.

4.7 According to MMII explain the impact of corporate taxes on the value of firms?