Here are book and market value balance sheets of the United Frypan Company (UF):

Book Value Balance Sheet
Net working capital	$	140			$	160		Debt
Long-term assets		200				180		Equity
	$	340			$	340

Market Value Balance Sheet
Net working capital	$	140			$	160		Debt
Long-term assets		260				240		Equity
	$	400			$	400

Assume that MM's theory holds with taxes. There is no growth, and the $160 of debt is expected to be permanent. Assume a 30% corporate tax rate. a. How much of the firms 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 $140 more and uses it to repurchase stock?

Increase in equity value