1. Daimler Corp is operating in a country U where personal income tax on bond investment is 20%, the corporate tax is 40%, while the personal tax on stock is 25%. Assume the company EBIT is $8 million and the cost of equity with zero debt is 8%.

(a) If Daimler current has $5 million total market value of debt financing, what would be the value of the company of Daimler Corp in this country U?

(b) What is the proportion of debt (wd) and equity (ws) financing for Daimler Corp with financial leverage?