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Here are book and market value balance sheets of the United Frypan Company (UF): Book Value Balance Sheet $ 20 $40 Debt Net working capital Long-term assets 80 $100 $100 Market Value Balance Sheet $ 20 $40 Debt Net working capital Long-term assets 140 120 Equity $160 $160 Assume that MM's theory holds with taxes. There is no growth, and the $40 of debt is expected to be permanent. Assume a 40% corporate tax rate. a. How much of the firm's value in dollar terms is accounted for by the debt-generated tax shield? PV tax shield b. How much better off will UF's shareholders be if the firm borrows $20 more and uses it to repurchase stock? Increase in equity value 60 Equity