Gem Stone Inc (GSI) currently generates perpetual EBIT of $50,000,000 per year. The firm is currently unlevered and there are 7,500,000 shares outstanding. The cost of equity is 12%. The firm will announce the issuance of $150,000,000 in new par debt at a cost of 8% and plans to use the proceeds to repurchase some of its outstanding shares. Assume there are no corporate taxes, personal taxes or bankruptcy costs.

1. What is the current unlevered value of GSI?
2. What will be the value of GSI after capital restructuring is done and the debt is issue?
3. Assume the corporate tax rate is 40%. What will be the value of GSI's equity after the capital restructuring is done and the debt is issued? There are no personal taxes or bankruptcy costs.