Determine your answers to questions 7 12 based on the following information:

RosenBall, ASA expects a cash-equivalent EBIT of 200 without any growth in the foreseeable future. The firms overall cost of capital (the required rate of return on assets) is 10%, the applicable tax-rate is 25%, and there are 200 shares outstanding. RosenBalls board of directors are currently looking into the possibility of refinancing the firm by borrowing 900 at an interest rate of 5% per year. The loan is serviced by paying the annual interest, only.

Problem 7

What is currently the all-equity value of RosenBall, ASA? State your answer as a whole number

without any decimal points.

Problem 8

With corporate taxes, only, what is RosenBalls market value following the announcement of the

refinancing plan? State your answer as a whole number without any decimal points.

Problem 9

With corporate taxes, only, what is RosenBalls market value per share following the announcement

of the refinancing plan? State your answer to two decimal points.

Problem 10

With corporate taxes, only, what is RosenBalls market value per share when the actual borrowing

has taken place? State your answer to two decimal points.

Problem 11

If Rosenballs lenders (bond investors) pay tax at a rate of 25% at the margin, while shareholders are tax-exempt, what is the contribution to firm value from leverage (debt)? State your answer as a whole number without any decimal points.

Problem 12

If Rosenballs lenders (bond investors) and shareholders pay tax at marginal rates of 25% and 10%, respectively, what is now the contribution to firm value from leverage (debt)? State your answer as a whole number without any decimal points.