eBook MM with Corporate Taxes Companies U and L are identical in every respect except that U is unlevered while L has $20 million of 8% bonds outstanding. Assume that: (1) All of the MM assumptions are met. (2) Both firms are subject to a 40% federal-plus-state corporate tax rate. (3) EBIT is $5 million. (4) The unlevered cost of equity is 12%. a. What value would MM now estimate for each firm? (Hint: Use Proposition 1.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. 25 million Company L: $ 33 million b. What is rs for Firm U? Round your answer to one decimal place. 12 % What is rs for Firm L? Do not round intermediate calculations. Round your answer to one decimal place. X % c. Find SL, and then show that SL + D = VL results in the same value as obtained in Part a. Enter your answers in millions. For to two decimal places. SL = $ 17 million SL + D = $ million d. What is the WACC for Firm U? Do not round intermediate calculations. Round your answer to two decimal places. % % What is the WACC for Firm L? Do not round intermediate calculations. Round your answer to two decimal places. 33% eBook MM with Corporate Taxes Companies U and L are identical in every respect except that U is unlevered while L has $20 million of 8% bonds outstanding. Assume that: (1) All of the MM assumptions are met. (2) Both firms are subject to a 40% federal-plus-state corporate tax rate. (3) EBIT is $5 million. (4) The unlevered cost of equity is 12%. a. What value would MM now estimate for each firm? (Hint: Use Proposition 1.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. 25 million Company L: $ 33 million b. What is rs for Firm U? Round your answer to one decimal place. 12 % What is rs for Firm L? Do not round intermediate calculations. Round your answer to one decimal place. X % c. Find SL, and then show that SL + D = VL results in the same value as obtained in Part a. Enter your answers in millions. For to two decimal places. SL = $ 17 million SL + D = $ million d. What is the WACC for Firm U? Do not round intermediate calculations. Round your answer to two decimal places. % % What is the WACC for Firm L? Do not round intermediate calculations. Round your answer to two decimal places. 33%