Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet $55 Debt 45 $100 Net working capital Long-term assets Market-Value Net working capital Long-term assets Equity Balance Sheet $ 55 Debt 210 Equity $265 a. PV tax shield b. WACC c. New value of the firm $75 25 $100 Assume that MM's theory holds except for taxes. There is no growth, and the $75 of debt is expected to be permanent. Assume a 21% corporate tax rate. $75 190 $265 a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. 7.3% and Equity b. What is United Frypan's after-tax WACC if "Debt = 15.7% ? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume an 7.3 % borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places. million % million =

Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Assume that MM's theory holds except for taxes. There is no growth, and the $75 of debt is expected to be permanent. Assume a 21% corporate tax rate. o. How much of the firm's value is accounted for by the debt generated tax shicid? Note: Enter your answer in miltion rounded to 2 decimal places. b. What is United Frypan's after tax WACC if rDets=7.3% and rivevity =15.7% ? Note: Do not round intermediate calculations, Enter your answer as o percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume an 7.3% borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places