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Given: bu 1 Wd = % of debt Rd = Cost of Debt T 40% 20% 8% Rs 12% =cost of equity 30% 8.50% Rf

Given:
bu 1 Wd = % of debt Rd = Cost of Debt
T 40% 20% 8%
Rs 12% =cost of equity 30% 8.50%
Rf 6% 40% 10%
RPM 6% =Rm-rf
EBIT 500,000
Shares 100,000
Hint:
bL= bU [1 + (1 - T)(D/S)] <--- Hamanda Equation (MM with Corporate Taxes)
rs= rRF + bL (RPM) <---CAPM
WACC = wd (1-T) rd + we rs
Vop = FCF(1+g) / (WACC-g) <---Application of Gordon Growth Model
D = Wd V
P = S + (D D0)/N0
Objectives:
1. Find the debt level of an optimal capital structure that max. Value of the firm.
2. Find the Stock price based on the Optimal Capital Structure

Need ASAP!!! I will thumbs up :) Please help.

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