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Consider a firm with a capital structure given below. Assume the CAPM holds and that we are in a Miller - Modigliani world with corporate

Consider a firm with a capital structure given below. Assume the CAPM holds and that we are in a Miller-Modigliani world
with corporate taxes.
At this capital structure:
i What is the firm's before-tax cost of debt?
rD
1 point
ii What is the firm's cost of equity?
rE
r
I
II
I
II
I
int
1
1
T
1
I
ts
iii What is the firm's after-tax WACC
iv What is the firm's required return on assets?
2 points
The firm decides to recapitalize to a new capital structure with less debt and less risky debt given below.
This year, your firm generated Sales of 100, Costs of goods sold of 40, and Depreciation of 10.
You also spent 15 in Capital Expenditures and had an increase in Net Working Capital of 3. Corporate Tax Rate is 20%.
What is your Free Cash Flow for the year?
5 points
He has to issue Junior Debt to obtain the capital to undertake the project now. Assume all cash flows are discounted at 0%.[Whole question is worth 12 points.]
nt.)
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